Best Investment Accounts For Young Adults – Advising Your Kids

Best Investment Accounts For Young Adults

What are the best investment accounts for young adults? When it comes to investing, there are a lot of options out there. And if you’re a young adult just starting, it can be overwhelming to try and figure out where to put your money. Do you go with a traditional brokerage account? Or something more specialized, like an IRA? 

What about a robo-advisor? In this article, we’ll break down some of the best investment accounts for young adults. We’ll help you understand the different types of accounts and how to choose one that fits your needs. So whether you’re looking for long-term growth or short-term gains, we’ve got you covered.

Roth IRA

A Roth IRA is an excellent investment account for young adults because it offers tax-free growth and withdrawal in retirement. Contributions to a Roth IRA are made with after-tax dollars, which means you won’t get a tax deduction when you contribute. However, all earnings in the account grow tax-free, and withdrawals in retirement are completely tax-free.

There are no income limits for contributing to a Roth IRA, so it’s an excellent investment account for high-income earners. The contribution limit is $6,000 annually ($7,000 if you’re 50 or older). If you have a 401(k) at work, you can also contribute to a Roth IRA – even if your employer doesn’t offer a Roth 401(k) – as long as your income falls below certain thresholds.

The most significant benefit of a Roth IRA is the tax-free growth and withdrawals in retirement. This can be especially valuable if you think your retirement tax rate will be higher than now. With a traditional IRA or 401(k), you’ll pay taxes on your withdrawals in retirement at your marginal tax rate. With a Roth IRA, your withdrawals are completely tax-free.

If you can contribute to a traditional IRA or 401(k) and a Roth IRA, you may want to “max out” your contributions to the conventional account and get the up-front tax deduction.

Traditional IRA

A Traditional IRA is a retirement account that allows you to contribute pretax dollars. This means that your contribution lowers your taxable income for the year. The money in the account grows tax-deferred, meaning you won’t pay taxes on the growth until you withdraw it in retirement. 

You can contribute to a Traditional IRA if you have earned income and are under age 70½. There is no upper limit on how much you can contribute, but the IRS sets a yearly limit. For 2019, the contribution limit is $6,000 ($7,000 if you’re 50 or older). 

If you have a 401(k) or another employer-sponsored retirement plan, your contributions to a Traditional IRA may be limited based on your income. 

The main benefit of a Traditional IRA is the tax savings. Your contributions lower your annual taxable income, resulting in a tax refund or lower taxes owed. The money in the account grows tax-deferred, meaning you won’t pay taxes on the growth until you withdraw it in retirement. 

Another benefit of a Traditional IRA is that there are no income limits for contributing. Anyone with earned income can contribute, regardless of how much they make. 

There are some drawbacks to consider with a Traditional IRA. One is that you will have to pay taxes on withdrawals in retirement. Withdrawals before age 59½ may also be


A SEP IRA is an excellent investment account for self-employed young adults or working for a small business. This type of IRA allows you to set up to 25% of your income (up to $53,000 in 2020) into the account each year. The money in the account can then be used to invest in stocks, bonds, and other investments.

One of the great things about a SEP IRA is that it offers tax-deferred growth. This means you won’t have to pay taxes on any of the money you make from your investments until you withdraw it from the account. It can be a considerable advantage if your investments are successful and grow over time.

Another benefit of a SEP IRA is that it’s relatively easy to set up and manage. You can open an account with any financial institution that offers IRAs, and no special requirements or paperwork are involved.

A SEP IRA is an excellent option if you’re looking for an investment account that offers both tax advantages and flexibility.


There are a few different types of retirement accounts that young adults can choose from, but one of the best options is a SIMPLE IRA. A SIMPLE IRA is an individual retirement account that allows you to make tax-deferred contributions. This means you won’t have to pay any taxes on the money you contribute until you withdraw it in retirement.

A SIMPLE IRA also has some other great benefits. For example, employer contributions are generally matched up to a certain percentage. It can help you grow your account balance more quickly. And, if you leave your job, you can usually take your SIMPLE IRA with you.

To open a SIMPLE IRA, you’ll need to find a financial institution that offers them (not all do). You’ll also need to set up an account and make regular contributions. Most people automatically deduct their contributions from their paychecks, making things easy and hassle-free.


A 401(k) is a retirement savings plan sponsored by an employer. It’s a great way to save for retirement because the money you contribute is deducted from your paycheck before taxes are taken out. This means that your 401(k) contributions are made with pretax dollars, lowering your taxable income and increasing your take-home pay.

In addition, many employers offer matching contributions, which can help you boost your retirement savings even more. For example, if your employer offers a 50% match on 401(k) contributions up to 6% of your salary, they will contribute 50 cents for every dollar you contribute, up to 6% of your salary.

If you’re a young adult just starting your career, now is a great time to start contributing to a 401(k). The sooner you start saving, the more time your money has to grow. And thanks to the power of compound interest, even small contributions can add up over time.


You can invest in a 403(b) retirement account if you work for a nonprofit or public school. This type of account has some great benefits, including tax-deferred growth and employer-matching contributions (in some cases).

However, there are also some drawbacks to consider. For example, you may have limited investment options and high fees. Additionally, you may only be able to access your money after retirement.

If you’re considering a 403(b) account, do your research and understand the benefits and drawbacks before making any decisions.


Assuming you’re in the workforce, a 457(b) plan is one of the best places to invest your money. Why? Because contributions are made pretax, which lowers your current taxable income. That means more money in your pocket now and fewer taxes owed later. It’s a win-win.

Additionally, the money in your 457(b) account grows tax-deferred, meaning you won’t owe any taxes on the growth until you withdraw the funds (most likely in retirement). And when you do finally start taking distributions, the withdrawals are taxed as ordinary income.

There are other things to keep in mind with 457(b) plans. First, not all employers offer them. Second, restrictions on how and when you can access your funds may be restricted. Nevertheless, if you have the option to participate in a 457(b) plan, it’s worth considering.


There are a lot of different investment accounts out there, and it can be hard to figure out which one is best for you. If you’re a young adult, you may wonder if a TSP account is right for you.

A TSP account is a retirement savings account offered by the federal government. It’s similar to a 401(k), but there are some key differences. One difference is that you can only contribute up to $18,500 per year (as of 2018). Another difference is that the money in your account is invested in government bonds, which tend to be less risky than stocks.

So, should you open a TSP account? It depends on your goals and risk tolerance. If you’re looking for a safe place to save for retirement, a TSP account is a good option. But other investment options might be better if you’re willing to take on more risk in pursuit of higher returns.

Final Thoughts

There are a lot of different investment accounts available for young adults, but not all of them are created equal. We’ve compiled a list of the best investment accounts for young adults based on factors like fees, minimum deposits, and account types. 

No matter what your financial goals are, there’s an investment account on this list that can help you reach them. So what are you waiting for? Start investing today!


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