- Features of Mutual Funds and Risk
- Money Market Mutual Funds*
- Bond Mutual Funds
- Hybrid Mutual Funds
- Retirement Plans and Mutual Funds
- Mutual Fund Management and Costs
- Stock (Equity) Mutual Funds
Retirement accounts, such as a company 401(k), an Individual Retirement Account (IRA), Simplified Employee Pension-IRA (SEP-IRA), or Keogh, are well suited to mutual funds, since the money in the account is invested for the long-term. Almost all of the thousands of mutual funds out there will accept IRA money.
With a 401(k), a company has chosen a number of funds to offer. Typically, they will include a money market fund, one or more bond funds, one or more stock funds, and company stock.
You may also be able to set up a self-directed brokerage account within a 401(k). This option is offered by a few companies and is generally not well publicized. The money is taken out by means of payroll deduction, just as it is through your regular options, but you get to choose the investments. It can be a good idea if you like the flexibility this offers and if the 401(k) does not offer many choices. Funds in a brokerage account may not have the borrowing privileges normally available to 401(k) participants, though. If you do need to borrow money, and your plan has a loan provision, you may not be able to borrow money directly from your brokerage account. However, you may be able to transfer money from your brokerage account to one of the other accounts that allow loans.
Risks associated with 401(k) loans:
- Borrowed money is not subject to potential growth.
- If you fail to repay the loan, it will be treated as a withdrawal, and subject to income tax and potential early withdrawal penalties.
- If you leave your job, you may be forced to pay off your loan, which could limit your ability to change jobs.
IMPORTANT NOTE: There may be fees and expenses that may not normally apply in traditional 401(k)s.
A Note about Annuities and Mutual Funds
Annuities are another way to tax-defer your money until retirement. With an annuity, you put after-tax money in and the earnings grow tax-deferred. That is, the amounts in the annuity are invested and the earnings are not taxed until you make a withdrawal.
Generally, because monies in an annuity grow tax-deferred, they should be used outside a qualified retirement plan.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Franklin Mint Federal Credit Union and Mint Wealth Advisors are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Mint Wealth Advisors, and may also be employees of Franklin Mint Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Franklin Mint Federal Credit Union or Mint Wealth Advisors. Securities and insurance offered through LPL or its affiliates are:
| Not Insured by NCUA or Any Other Government Agency | Not Credit Union Guaranteed | Not Credit Union Deposits or Obligations | May Lose Value |
*The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: NJ, PA, NY, DE, AZ, MI, FL, MD, TX, VA, GA, NC.
Financial Learning Center content created by TrueBridge, Inc. The information provided is based upon sources and data believed to be accurate and reliable. The content contained herein is intended for information and illustrative purposes only, should not in any way be construed as a personal recommendation, and should be used in conjunction with individual professional advice.
