3 Accounts That Can Help You Meet Your Financial Goals

3 Accounts That Can Help You Meet Your Financial Goals - Marshall Financial Group

Typically, the New Year means New Year’s resolutions. While common resolutions include losing weight or getting in shape, a survey by People magazine found that 62% of respondents have a very practical goal in mind for 2021: saving for the future. People also want to budget their money better and pay down debt.

We talk to our clients every day about their investment accounts, as well as saving and growing their money. Many investors already have individual investment accounts, joint accounts, and Individual Retirement Accounts (IRAs). However, there are several other kinds of accounts that are commonly overlooked but could help you and your family achieve financial goals in a more effective manner. Here are three different accounts you might not know you can open.

Individual 401(k)s 

While many people have 401(k)s through their employer, people who are self-employed or own a business with no employees can also open a 401(k). An Individual 401(k) allows you to make substantial contributions to your retirement fund. Many of the benefits are the same as a typical 401(k), but with this account, you direct how your contributions are invested.

Many of the same rules apply to these accounts as to 401(k)s. That is, the contributions are tax deductible in the year that they are made, earnings grow tax-deferred, and assets are taxed when they are withdrawn (i.e., in retirement). In 2021, the maximum contributions to a participant’s account is $58,000, subject to certain limitations.


A Simplified Employee Pension Individual Retirement Account (SEP-IRA) is another account option for someone who is self-employed, earns freelance income, owns a business, or employs others. Generally, this allows employers to contribute to the account, but individuals can also make contributions. While employers are limited to contributing $19,500 in a traditional 401(k), the maximum contribution limit for a SEP-IRA is $58,000 for 2021, with self-employed individuals able to contribute up to 20% of their net income. Employees can contribute up to $6,000 to the account in 2021 (or $7,000 if they are over 50).

Uniform Trust to Minors and Uniform Gift to Minors

For parents, grandparents, or other adults who want to build wealth for children or start a college fund, Uniform Trust to Minors (UTMAs) and Uniform Gifts to Minors (UGMAs) can be beneficial accounts to open. These are custodial accounts where an adult sets up a financial account for a minor. Depending on the state, a minor is defined as either under 18 or under 21. Once the recipient turns 18 or 21, they are able to access the principle and any investment returns in the account. These accounts are a great way to set up a child for financial success, with some benefits for the individual who sets up the UTMA/UGMA.

A UTMA/UGMA functions in some ways like a trust, however, it does not require a lawyer to open the account. While your child is still a minor, you can use the funds in a UGMA or UTMA account to pay for expenses that benefit the child, such as clothes for school and summer programs. The transfer of funds is irrevocable, meaning that once the funds have been deposited, they are excluded from creditors or other family members. Additionally, these accounts can lead to tax savings. The first $1,100 of a child’s unearned income is tax-free. The next $1,100 is taxed at the child’s rate. Anything over that is taxed as the parent’s income. This account both sets a child up for financial success and can help them learn about investing as they see how the account grows over the years.

Learning about different types of accounts and how to use them for maximum benefit can help you get the most out of money invested.