An Easy Way To Invest: Use Your Employer’s Broker
If you are starting to invest, the easiest place to start is with your employer. The company you work for has setup retirement investing accounts for you, perhaps a defined contribution plan, such as a 401(k) retirement account and maybe even a pension account. Some companies even enroll you automatically in their defined contribution retirement plan (if you don’t want to contribute, you will need to tell them you don’t want to). The combination of automatic account creation plus easy funding through payroll deductions make investing at your job really easy.
If you want to achieve any kind of financial security or freedom, though, you are going to need to setup taxable accounts, outside of retirement investing.
Can your employer help, here? In many cases, your employer can help you here, too.
Company Retirement Investment Accounts
Most companies contract out their retirement plans to third party investment firms. The flexibility of these plans is quite extensive. Sometimes the retirement plans you find at work can have one firm be the administrator of the plan while the plan itself contains investment instruments from different investment firms.
The extent of plans varies widely. Some retirement plans offer the ability to function as full service brokerage accounts which give you the ability to invest in just about anything. Typically, though, the plans offer a distinct list of funds, which keeps the plan simple and reduces costs.
Setup Taxable Account: Use Your Adminstrator
The first place to go to setup a taxable account is your retirement plan administrator. Login to your retirement account using the retirement account administrator website. From there you will be able to setup additional accounts with minimum fuss! They have all of your information required to setup the account, it is little more than a formality to get it started.
Once the account is setup, all you would need to do is to fund the account. This is the difference here, you will need to send money to the account yourself.
I worked for an employer who setup my 401(k) account at Vanguard. To invest with Vanguard in a taxable account, all I needed to do was to login to my retirement account. Once there, it was easy enough to setup whatever I wanted, taxable accounts or even IRAs.
Setup Taxable Account: Stock Options or IPOs
Sometimes, you company will setup a taxable account on your behalf when some special situations come up, such as spinoff IPOs, or stock awards or options. Most companies aren’t in the financial products business, so these accounts are needed to manage these investments.
Once the account is setup, you can then use it like a regular brokerage account or setup or add to it to make that happen.
One company I worked for offered employees an early opportunity to buy some shares of a future spinoff IPO. To make this happen, a taxable investment account was opened on my behalf at Fidelity. It was easy enough just to add more money to this brokerage account and start investing more.
Setup Taxable Account: Rollover 401(k) to An IRA
Another situation that could come up is when you rollover a 401(k) from an old employer to an IRA. The easiest way to handle rollovers is to simply move the money to an IRA with the same brokerage administrator. (Trust me, they make it very easy to do this, they want the business).
This is an opportunity to setup a taxable account, it won’t require much more effort to do it. If you have after tax money in your 401(k), you will want to put it somewhere. This money can’t go in a deductible IRA because you already paid taxes on it. Instead of getting a check and spending it, take this as an opportunity to invest it in a taxable account along side your IRA.
The brokerage industry is required to collect information about everyone who invests to comply with regulations that limit financial services employees from conflicts of interest. So, opening up a taxable account does require a little more work to complete because you will need to answer some questions about your work. Expect to answer a few questions.
Also, some firms want to discourage you from investing in products you may not be familiar with, so you may get questions on that.
In addition to creating an easy opportunity to invest more, you may find that you can also use your retirement accounts as an asset to get special treatment and services. This occurs when you have a certain level of assets. So, investing at the same firm as your retirement account is located can offer you other benefits you might not get putting your money elsewhere.