Women and Investing

67% of women are investing in non-retirement accounts. Here’s why you should, too

6 Minute Read

There's a reason so many people are drawn to retirement plans like IRAs and 401(k)s. These accounts offer a host of tax benefits. Traditional IRAs and 401(k)s, for example, allow for tax-free contributions. Put $2,000 of your earnings into one of these accounts, and that's $2,000 the IRS won't tax you on.

But despite the benefits of saving in a dedicated retirement plan, a growing number of female investors are also using other accounts to grow wealth. One survey reports that 67% of women have investments outside of an IRA or 401(k), up from 44% in 2018.

If you're keeping your investments solely in a retirement plan, you may want to rethink that. Here's why.

The upside of having a brokerage account

While IRAs and 401(k)s offer nice tax benefits, those benefits come with strings attached. The money you save in one of these plans cannot be accessed before the age of 59-1/2. If you attempt to take a withdrawal sooner, you could face a 10% penalty on the sum you take out.

Say a need for money arises and you want to access some of the cash you've socked away in your retirement plan. If you withdraw $5,000 at age 40, you'll lose $500 of that right off the bat unless you happen to qualify for an exception.

On the other hand, if you open a brokerage account and invest some of your money there, you'll have more flexibility. Want to cash out some gains and use the money to fix up your home? That's your choice. You'll pay taxes on those gains, but taxes on gains also apply to traditional IRAs and 401(k)s. The only difference is that you get to defer those taxes until you take withdrawals. Or, to put it another way, you don't have to pay taxes on gains year after year in an IRA or 401(k), whereas with a brokerage account, you'll pay taxes on your gains the year you receive them.

What's more, some retirement plans only offer limited investment choices. 401(k) plans, for example, generally don't let you buy individual stocks. That could mean missing out on a big opportunity to invest the way you want and grow wealth.

When you open a brokerage account, you can invest in a nice mix of individual stocks, mutual funds, and ETFs. Some brokerages even allow you to buy cryptocurrency.

Take charge of your investments

Everyone should aim to save and invest for the future. But for women, it's really important to take steps to set up a secure retirement.

Women are statistically likely to outlive their male counterparts, so it's important to approach retirement with a strong investment mix. Saving in a retirement plan alone may limit your investment choices, causing you to fall short on your savings goals.

These days, there are many brokerage accounts to choose from, so it pays to do some research and compare features like fees and educational resources. Spending a little time finding the right brokerage account could set the stage for many years of successful investing.

 

This article was written by Maurie Backman from The Motley Fool and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.

 

Related Articles

Economic Indicators You Should Know For Investment

Women And Investing: 5 Ways To Approach Risk More Comfortably

3 Asset Allocation Rules You Should Know By Heart

5 Financial Planning Tips For Women

Getting Started On Responsible Investing: What You Need To Know

Subscribe to Investment Insights

Meet with a Financial Advisor

Ready to invest?  We're ready too.  Let us introduce you to your UnionBanc Investment Services Financial Advisor.

Connect with a Financial Advisor
UnionBanc Investment Services is making this article available for general informational purposes only and does not purport it to be a complete analysis of the subject discussed. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this article should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

Brokerage and investment advisory services are available through UnionBanc Investment Services LLC, an SEC-registered broker-dealer, investment adviser, member FINRA/SIPC, and subsidiary of MUFG Union Bank, N.A. Insurance services are available through UnionBanc Insurance Services, a division of MUFG Union Bank, N.A. with a California domicile and principal place of business at 1201 Camino Del Mar, Suite 208, Del Mar, CA 92014. California State Insurance License No. 0817733. Non-deposit investment and insurance products: • Are NOT deposits or other obligations of, or guaranteed by, the Bank or any Bank affiliate • Are NOT insured by the FDIC or by any other federal government agency • Are subject to investment risks, including possible loss of the principal amount invested • Insurance and annuities are products of the insurance carriers.