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Investing can seem intimidating, especially when you're just learning about personal finance. Short sale. Alpha. Emerging markets. These and other financial terms around complicated. Fortunately, you don't need to ace a vocabulary test to begin your investment journey. Start by reviewing these three beginner investment options to start building wealth today.
1. Workplace Retirement Plans
Many employers offer employee benefits packages that include optional enrollment in a retirement savings plan. Whether it's a 401(k), 403(b), or another employer-sponsored plan, consider participating to grow your retirement savings with pre-tax dollars. Some employers will match contributions up to a set percentage of your annual earnings.
For example, if an employer matched the 3% employee contribution on a $60,000 salary, the employee would double their money and have a total contribution of $3,600 for the year added to their account.
$1,800 (3% of $60,000)
Employer matching contribution
$1,800 (3% of $60,000)
Total annual contribution
If your employer doesn't offer a match, you should still contribute as much as you can into your retirement plan each year. The money you contribute from your paycheck lowers your taxable income and could result in fewer taxes owed. Speak with your employer about contribution limits and matching eligibility requirements.
2. Individual Retirement Accounts
Individual Retirements Accounts (IRAs) are another investment option designed to help you save for retirement. Like workplace retirement plans, IRA earnings grow tax-deferred until you withdraw the funds. But unlike workplace plans, there's no matching contribution option. But you can decide when you'd like to pay taxes on your deposits - now or post-retirement. For 2022, you may contribute up to $6,000 into an IRA and receive additional tax benefits if you fall within certain income thresholds.
3. Government Bonds
When you invest in a government bond, like a Series EE Savings Bond, you're essentially lending money to the United States government. At the end of the loan period, which may be between three and thirty years, you should receive your initial investment plus the dividends earned during the bond period. As with other investments, consider your overall financial goals when selecting a particular bond or loan period.
Time is on your side when it comes to long-term investing. Don't navigate your investment options alone. Learn more about these and other ways to grow your money when you schedule an appointment with a Vermont Federal financial professional. Or, call us at (888) 252-0202 to speak with someone about your financial goals.