5. Types of Accounts
b. Taxable vs. tax-advantaged tools
Tax-advantaged accounts are designed to help people save and build assets for long-term goals such as retirement and college savings. These accounts offer tax savings and tax deferrals. Certain accounts are available only through employers and others must be established by the investor.
On the next page you’ll find a chart comparing some of the most common savings and investment tools.
In a taxable account, the investor will have to report and pay taxes annually on earnings from interest, dividends
, and capital gains. Taxable accounts will work for short-term or long-term investing if you want to take the money out whenever you want because there are no penalties for withdrawing money except in the case of certificates of deposit.