Special Report

20 Best Ways to Invest $100K

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6. Open a brokerage account

When opening a brokerage account, whether online or brick and mortar, check the minimum deposit requirement, the cost, and customer service.

Brokages can be full service or discount. With a full-service brokerage, you do not just buy and sell stocks, you can also use other services, like advice on saving for retirement, investing, and minimizing capital gains taxes. These services come with charges.

Discount brokerages generally charge lower commission fees for trades. Some pay their brokers a salary rather than a commission on trades. Discount brokerages do not provide stock market advice.

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7. Consider a “robo-advisor”

A robo-advisor might be the right option if you do not have a lot of investing experience. But if you do, this service builds and manages an investment plan that is based on your situation and objectives. Robo-advisor services usually charge lower fees than human financial advisor services. They offer services such as automatic rebalancing and tax-loss harvesting, a method to lower your taxes because of investment losses.

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8. Or hire a (human) financial advisor

There is no substitute for the interaction with a human financial advisor when it comes to properly assessing your goals and risk tolerance in investing.

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9. Use an asset allocation calculator

An asset allocation calculator is an online tool that can help you determine your risk tolerance and help you allocate your investments if you are going at it alone. If not, it can help match you with a qualified, vetted advisor who can help you achieve your financial goals.

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10. Invest in a 401(k)

A 401(k) plan is an employer-sponsored retirement savings account that allows you to defer paying taxes on some portion of your income by contributing it to the account. Employee contributions on a periodical basis come directly out of their paychecks and may be matched by the employer.

The personal contribution limit, or employee deferrals, for traditional plans is $20,500 in 2022, subject to cost-of-living adjustments. Some plans allow for participants age 50 or over to make catch-up contributions at the end of the calendar year. The IRS allows additional elective salary deferrals of $6,500 in 2022 for traditional 401(k) plans.

Participants in a traditional 401(k) plan are not allowed to withdraw their funds until they reach age 59½, with the exception of withdrawing funds to cover some hardships or life events. The penalty for early withdrawals from a 401(k) retirement plan is a 10% additional tax levied by the IRS. You only pay income tax when you withdraw the money after you retire.

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