Jul 5, 2018
Investing vs. Saving for Retirement. Which is Right For You?
Both accounts could help you; they’re for different time horizons.
Helping you to save money and invest are two core goals at Stash. We think that both are essential to increasing your financial stability and independence.
That’s why Stash offers two types of accounts, one for investing and one for retirement accounts.
Read on to find out which one is right for you.
Here’s what they have in common
Both accounts will let you choose from thousands of single stocks and dozens of low-cost ETFs. The stocks include a wide variety of some of the biggest blue chip, consumer, or tech-focused companies around, as well as new companies that have only recently had public offerings.
Both allow you to buy what’s known as fractional shares.
What’s a fractional share?
Often the share price of a stock or fund can be high—hundreds or even thousands of dollars. We let you buy a portion of these shares, at a price you can afford. Your investment still works the same way as if you were buying full share amounts.
Here’s a breakdown of investing vs. saving for retirement with Stash:
Investing with Stash
Get your feet wet in the investment world with Stash. Stash lets you invest in Exchange Traded Funds (ETFs), or individual stocks of some of the most prominent publicly traded companies around.
You can fund your account with any dollar amount.
Investing is for medium to long-term savings goals. Since you’ll be investing the money, it shouldn’t be for short-term needs. (An emergency fund, or cash that you keep in a bank account for a rainy day, is probably best for that.)
Here are some other things to keep in mind about investing with Stash:
- You can withdraw your money from your account at any time.
- Unlike the retirement accounts that Stash offers, the regular investment account is subject to capital gains taxes on your earnings each year. Find out more about capital gains taxes here.
- There is no limit on how much you put into your investment account annually.
- You’ll get an investment account¹ when you sign up for any Stash account—Stash Beginner, Stash Growth, or Stash+.²
Saving for retirement with Stash
Retirement will be here before you know it. And the best time to start preparing for it is by saving now. It may be 20, 30, even 40 years away. Opening a retirement account³ with Stash could help you meet this long-term goal.
Stash lets you start saving for retirement with $5.
Once you’ve funded your account, you’ll have access to the same funds and stocks as you do with an investment account.
Here’s what’s different:
- You’ll have a choice between two different accounts. One is called a traditional individual retirement account (IRA). The other is called a Roth IRA.
- You fund a traditional IRA using pre-tax dollars, which could lower your tax rate. Earnings grow tax-free until retirement.
- In contrast, a Roth is funded with after-tax dollars. Like a traditional IRA, however, once you’ve funded the account, your earnings grow tax-free.
- If you withdraw money from a retirement account before age 59½, you’ll owe taxes and a penalty.
- You’ll get a retirement account if you sign up for a Stash Growth or Stash+ account.
|Stash Invest||Stash Retire|
|Minimum deposit||Any dollar amount||$5|
|Saving for...||Medium to long term goals||Retirement|
|Withdrawal||Withdraw any time||Possible penalties for early withdrawl|
|Taxes||Investment income taxed as capital gains||Differs between Traditional And Roth IRA. Investment income taxed as income tax.|
Investing vs keeping money in your savings account
Think of your investment and retirement accounts as places where you can put your savings to work.
If your money just sits in a typical bank account, it’s not going to earn much interest. In contrast, investment and retirement accounts can benefit from something called compounding.
Compounding is when the interest or earnings your principal makes also earns interest or earnings, which can dramatically increase your rate of savings.
All investing carries risk, and it’s important to know that you can also lose money with your investments.
1An Investment account offered through Stash is a non- discretionary taxable brokerage account. .
2Stash offers three plans, starting at just $1/month. For more information on each plan, visit our pricing page. You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the Custodian.
3Stash does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. Nothing in this content should be construed as Legal, Investment or Tax advice.You should consult with a tax advisor
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