Every Account Type, Explained

Titling is a separate question from the kind of account

A lot of the confusion in this territory comes from mixing two different things: what kind of account something is, and whose name it is in. They are independent, and you choose them separately.

“Joint account” is not a type of account. It is a way of holding one, and you can hold a checking account, a savings account or a brokerage account jointly. The same is true of naming someone to receive the account when you die — often called payable-on-death or transfer-on-death — which is a designation added to an ordinary account rather than a product you go and buy. “Custodial” works the same way: it describes who controls an account held for a minor, not what the account is.

This matters more than it sounds, because titling and beneficiary designations quietly override a will. Money in an account with a named beneficiary goes to that person regardless of what your will says, which is why a beneficiary designation left unchanged after a divorce or a death is one of the most consequential pieces of paperwork most people never look at again.

One more pairing belongs here. Traditional and Roth are not two accounts in an employer plan — they are two ways of contributing to one plan. If your 401(k) offers both, you are choosing how this year’s contribution is taxed, not opening something new.

Retirement through an employer

These all do the same basic job — move money out of this year’s pay and into an account you cannot easily touch until later, and they differ mostly in who is allowed to offer them. A 401(k) comes from a private company, a 403(b) from a public school or a tax-exempt employer, a 457(b) from a government or tax-exempt employer, and the Thrift Savings Plan from the federal government. A reader comparing them is usually comparing employers, not accounts.

The split that actually changes your life is not which number is in the name. It is whether the plan promises you a benefit or promises you an account. A defined benefit plan owes you an income in retirement and the employer carries the risk of paying for it. A defined contribution plan owes you whatever is in your account, and you carry the investment risk. Almost every plan below is the second kind.

One feature of workplace plans is worth knowing before you move money out of one. If you leave a job in or after the year you turn 55, you can generally take money from that employer’s plan without the early-withdrawal penalty that would otherwise apply before 59½. The exception belongs to the plan, not to you — roll the balance into an IRA and it is gone, because IRAs do not have this rule. For anyone thinking about retiring in their late fifties, that is a reason to think twice before consolidating.

• 401(k)

  The standard private-employer retirement plan: you choose a percentage of pay to divert, your employer often adds a match, and you pick from the menu of investments the plan offers. You cannot open one on your own: it exists only if an employer sponsors it.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Withdrawals are ordinary income on the full amount — there is no basis to subtract and no capital-gains treatment, however the money grew. This describes a traditional contribution; the same plan may also accept Roth contributions, which reverse the first and third stages. That is a choice inside one plan, not a second account.

  Who opens it

  Through an employer

  When you can get at it

  Retirement age rules

• Roth 401(k)

  Not a separate account so much as a separate bucket inside a 401(k): the money goes in already taxed, and qualified withdrawals come out untaxed. Employer matching contributions may land in the pre-tax side even when your own contributions are Roth.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Not taxed Withdrawals are tax-free only if they are qualified; see the term page for the conditions. Unlike the pre-tax side, a designated Roth account in a workplace plan no longer forces you to take withdrawals during your lifetime.

  Who opens it

  Through an employer

  When you can get at it

  Retirement age rules

• 403(b)

  The 401(k)’s counterpart for public schools, universities, hospitals and other tax-exempt employers. If your payroll paperwork calls it a tax-sheltered annuity or a TSA, that is the same thing — the IRS still uses that name too. Your money sits in one of three wrappers: an insurance annuity contract, a mutual-fund custodial account, or a church retirement income account. Which one you have is where the fee and surrender-charge questions live, so it is worth finding out.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Withdrawals are ordinary income on the full amount. Traditional contributions shown; many plans also offer a Roth option.

  Who opens it

  Through an employer

  When you can get at it

  Retirement age rules

• 457(b)

  A deferred compensation plan for government and some tax-exempt employers. The distinction that matters is who sponsors it: a governmental 457(b) holds your money in trust for you, while one sponsored by a tax-exempt employer leaves the assets exposed to that employer’s creditors.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Withdrawals are ordinary income on the full amount.

  Who opens it

  Through an employer

  When you can get at it

  Depends on the plan Generally tied to leaving the employer rather than to a birthday.

• Thrift Savings Plan

  The federal government’s own defined contribution plan for civilian employees and the uniformed services. Structurally a 401(k) with an unusually small, unusually cheap investment menu.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Withdrawals are ordinary income on the full amount. Traditional contributions shown; a Roth TSP option also exists.

  Who opens it

  Through an employer

  When you can get at it

  Retirement age rules

• Defined benefit plan (pension)

  A promise of income in retirement, usually calculated from your pay and years of service, with the employer responsible for funding it. You do not have a balance so much as a claim, which is why the questions here are about the promise and the payout choice rather than about investments. Private-sector plans of this kind are insured by a federal agency, within limits, if the employer fails, a backstop that does not extend to any account-style plan.

  How it is taxed

  Money in: Nothing • Growth: Not taxed • Money out: Taxed Employer-funded, so there is usually no contribution of yours to tax. Benefits are ordinary income when paid, on the full amount.

  Who opens it

  Through an employer

  When you can get at it

  Depends on the plan Set by the plan’s own retirement rules, not by an account balance.

• Defined contribution plan

  The category the 401(k), 403(b) and TSP all sit inside: what you get is the account, whatever it grows to. Worth knowing as a category because it names where the investment risk sits — with you.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Pre-tax withdrawals are ordinary income on the full amount.

  Who opens it

  Through an employer

  When you can get at it

  Retirement age rules

• Cash balance plan

  Legally a defined benefit plan wearing the clothes of an account: your benefit is stated as a hypothetical balance with a credited rate, but the employer still bears the funding risk. That legal character is worth knowing, because it is routinely miscategorized as a defined contribution plan. Common where a firm’s owners want to contribute more than a 401(k) allows.

  How it is taxed

  Money in: Nothing • Growth: Not taxed • Money out: Taxed Employer-funded; benefits are ordinary income when paid, on the full amount.

  Who opens it

  Through an employer

  When you can get at it

  Depends on the plan

• Profit-sharing plan

  An employer-funded plan where the contribution is discretionary rather than tied to what you defer: the company decides each year whether and how much to put in. Frequently bolted onto a 401(k) rather than standing alone.

  How it is taxed

  Money in: Nothing • Growth: Not taxed • Money out: Taxed Employer-funded going in; withdrawals are ordinary income on the full amount.

  Who opens it

  Through an employer

  When you can get at it

  Retirement age rules

• After-tax 401(k) contributions

  A third bucket that some plans allow, distinct from both traditional and Roth: the money goes in taxed and the growth is only deferred, not forgiven. It exists mainly as a stepping stone, and the reason to care is that the growth is treated differently from a Roth’s.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Partly taxed Your own contributions come back untaxed because you already paid tax on them; only the earnings are taxable, and they are ordinary income rather than capital gains. That split above basis is the whole point of the category.

  Who opens it

  Through an employer

  When you can get at it

  Retirement age rules

• Nonqualified deferred compensation

  An agreement to be paid later, offered to a select group of executives, and the important thing about it is what it is not: not a funded account held for you, and not protected the way a qualified plan is. If the employer fails, you are generally a creditor.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Deferral postpones income tax, and payments are ordinary income on the full amount when they arrive. The timing is rigid and set when you elect, and the deferral does not escape payroll tax the way it escapes income tax.

  Who opens it

  Through an employer

  When you can get at it

  Set by the document The payout schedule is elected in advance and is hard to change.

• Employee stock ownership plan (ESOP)

  Glossary page coming soon

  A retirement plan that invests in the employer’s own stock, so your retirement savings and your paycheck depend on the same company. That concentration is the feature and the risk.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed

  Who opens it

  Through an employer

  When you can get at it

  Depends on the plan

Retirement when you are the employer

If you have self-employment income, nobody is going to offer you a plan; you adopt one. All three of these let you put away substantially more than an IRA allows, and the question that picks between them is not really about the accounts. It is whether you have employees other than yourself and a spouse.

One counterintuitive detail worth knowing, because most people assume the opposite: under federal bankruptcy law, SEP and SIMPLE IRAs are excluded from the dollar cap that applies to traditional and Roth IRAs. Money you contributed as a self-employed person can therefore be better protected in bankruptcy than money in an ordinary IRA. Protection from creditors outside bankruptcy is a matter of state law and varies.

• Solo 401(k)

  A 401(k) for a business with no employees other than the owner and a spouse. It lets you contribute in two capacities (as the employee deferring pay and as the employer), which is what makes it the highest-capacity option for many one-person businesses. Hiring someone generally ends its eligibility.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Withdrawals are ordinary income on the full amount. A Roth option is commonly available for the employee-deferral side.

  Who opens it

  You are the employer

  When you can get at it

  Retirement age rules

• SEP IRA

  The simplest to run: employer contributions only, no employee deferrals, and it works with employees, but you generally have to contribute the same percentage of pay for eligible staff as for yourself, which is what makes it expensive once you hire. A long-standing small employer may still run an older variant called a SARSEP, which does allow salary deferrals; those could not be set up after 1996, so you may hold one but cannot choose one.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Withdrawals are ordinary income on the full amount.

  Who opens it

  You are the employer

  When you can get at it

  Retirement age rules

• SIMPLE IRA

  Aimed at small employers that do want staff to defer their own pay, with a mandatory employer contribution and much less administration than a 401(k). The trade is a lower contribution ceiling than a 401(k) and less flexibility. It also carries a trap the others do not: for the first two years you participate, the early-withdrawal penalty is 25% rather than the usual 10%.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed

  Who opens it

  You are the employer

  When you can get at it

  Retirement age rules Early withdrawals cost 25% rather than 10% during your first two years in the plan.

Retirement you open yourself

An IRA is the account you can open without anyone’s permission, at a bank or a brokerage, in an afternoon. The umbrella term is deliberately an *arrangement* rather than an account, because it covers both a custodial account and an annuity contract.

Traditional and Roth are the two main flavours, and the choice between them is a bet about tax rates: a deduction now against tax-free withdrawals later. The variants below are the same two accounts in particular circumstances rather than additional types.

• Traditional IRA

  The individual pre-tax retirement account, subject to a real catch: the deduction phases out if you (or a spouse) are covered by a workplace plan and your income is high enough. A contribution you cannot deduct still goes in, but it creates basis you have to track. If a broker once called something of yours a “Rollover IRA”, this is what it is: there is no such separate account type, only a traditional IRA that happens to hold money rolled over from a workplace plan. Keeping that money separate from your own contributions is a practical choice rather than a legal category, and it can preserve the option of rolling it into a future employer’s plan.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Withdrawals are ordinary income on the full amount, not capital gains — one real cost of the wrapper is that it converts investment gains into ordinary income. The strip assumes a deductible contribution; a non-deductible one reads taxed / free / partly instead, because only the amount above your basis is taxed, and the paperwork that tracks it is why people meet Form 8606.

  Who opens it

  Open it yourself

  When you can get at it

  Retirement age rules

• Roth IRA

  Contributions go in taxed, growth and qualified withdrawals come out untaxed, and, unusually, your own contributions can be withdrawn at any time without tax or penalty. Direct contributions are barred above an income threshold, which is why the back door exists.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Not taxed Tax-free treatment of earnings depends on the withdrawal being qualified. A Roth IRA has never required withdrawals during your lifetime, which is why it is also the account people use to leave money to heirs.

  Who opens it

  Open it yourself

  When you can get at it

  Retirement age rules Contributions you made are reachable anytime; earnings are not.

• Spousal IRA

  Not a distinct account type — an ordinary IRA for a spouse with little or no earned income, funded on the strength of the working spouse’s income. Worth naming because the default assumption that you need your own earnings is wrong here.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Follows whichever kind you open, traditional or Roth.

  Who opens it

  Open it yourself

  When you can get at it

  Retirement age rules

• Inherited IRA

  What an IRA becomes when you inherit it, and it plays by different rules from the one you fund yourself: there are withdrawal deadlines, and they turn on your relationship to the person who died. What you inherit is a tax-deferred wrapper with a clock on it, not a pot of cash. Older writing describes spreading withdrawals over a beneficiary’s lifetime — “stretching” an IRA. That was narrowed rather than abolished: it still applies to deaths before 2020 and to five defined classes of beneficiary, including a surviving spouse and a beneficiary not much younger than the person who died.

  How it is taxed

  Money in: Nothing • Growth: Not taxed • Money out: Taxed You are not contributing, so there is no "in" stage. Withdrawals from an inherited pre-tax account are ordinary income on the full amount. An inherited Roth generally comes out untaxed while still being subject to the deadlines; the deadline and the tax are two separate questions.

  Who opens it

  Opened for someone else

  When you can get at it

  Depends on the plan Governed by post-death deadlines rather than by your own age.

• Self-directed IRA

  Glossary page coming soon

  A traditional or Roth IRA at a custodian willing to hold assets beyond public markets: real estate, private notes, and so on. It is a custodian choice rather than a fourth kind of IRA, and such custodians typically do no vetting of what you buy. The rules against dealing with yourself or your family inside one are strict, and the penalty is not a fine: a prohibited transaction can make the entire account stop being an IRA retroactive to the first day of that year, so the whole balance becomes taxable at once. There is no partial fix.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Taxed Whatever the underlying IRA is: the label describes what it may hold, not how it is taxed.

  Who opens it

  Open it yourself

  When you can get at it

  Retirement age rules

Health and care

Four things here have similar acronyms and behave completely differently, and the axis that separates them is not tax treatment; all of them are tax-favored. It is ownership. An HSA is yours: it comes with you when you change jobs and there is no deadline to spend it. An FSA is your employer’s plan that you fund, with a use-it-or-lose-it character and limited portability. An HRA is funded entirely by the employer and is theirs.

That is why the HSA gets talked about as a retirement account as well as a health account. It is the only one of the four you can let sit and grow for decades.

• Health savings account (HSA)

  The most tax-favored account in the tax code: money goes in untaxed, grows untaxed, and comes out untaxed when spent on qualified medical costs. You can only contribute while covered by a qualifying high-deductible health plan, but the account stays yours and spendable afterwards. An older cousin, the Archer MSA, works differently and is closed to virtually all new participants. If you hold one, its rules are not the ones described here.

  How it is taxed

  Money in: Not taxed • Growth: Not taxed • Money out: Not taxed All three stages are free only for qualified medical expenses. Spent on anything else the withdrawal is ordinary income on the full amount, with an extra penalty before a threshold age.

  Who opens it

  Open it yourself

  When you can get at it

  Spend it on the purpose Reachable anytime for medical costs; after a threshold age the penalty for other uses drops away.

• Health flexible spending account (FSA)

  An employer plan you fund by payroll deduction to pay medical costs with untaxed money. Unlike an HSA it is not yours: it generally does not follow you out of the job, and unspent money is largely forfeited at the end of the plan year.

  How it is taxed

  Money in: Not taxed • Growth: Nothing • Money out: Not taxed There is no growth stage to speak of; it is a spending account, not an investment account.

  Who opens it

  Through an employer

  When you can get at it

  Spend it on the purpose Within the plan year, subject to whatever carryover or grace period the plan allows.

• Dependent care FSA

  Glossary page coming soon

  The same machinery aimed at childcare and dependent care rather than medical bills, so you pay for care with untaxed money. The amount you can exclude is $7,500 a year, or $3,750 if you are married filing separately — a figure fixed in the statute rather than adjusted for inflation, raised for 2026 after decades at $5,000. It interacts with the childcare tax credit, so using both needs care.

  How it is taxed

  Money in: Not taxed • Growth: Nothing • Money out: Not taxed A rare case where a limit is worth stating here: the $7,500 is fixed in the statute with no inflation adjustment, so unlike most figures on this subject it does not move each January.

  Who opens it

  Through an employer

  When you can get at it

  Spend it on the purpose

• Limited purpose FSA

  Glossary page coming soon

  An FSA deliberately restricted to dental and vision so that it can coexist with an HSA, because ordinary health FSA coverage would disqualify you from contributing to one. It exists to solve exactly that conflict.

  How it is taxed

  Money in: Not taxed • Growth: Nothing • Money out: Not taxed

  Who opens it

  Through an employer

  When you can get at it

  Spend it on the purpose

• Health reimbursement arrangement (HRA)

  Glossary page coming soon

  Employer-funded and employer-owned: they set aside an amount they will reimburse you for, and you cannot contribute to it yourself. Some variants can be used to buy individual coverage instead of a group plan. Strictly it is a promise to reimburse rather than an asset you hold, which is why it behaves less like an account than anything else in this group.

  How it is taxed

  Money in: Nothing • Growth: Nothing • Money out: Not taxed Funded with employer money, so there is no contribution of yours to tax.

  Who opens it

  Through an employer

  When you can get at it

  Spend it on the purpose

• High deductible health plan (HDHP)

  Not an account at all — it is the insurance plan whose design makes you eligible to fund an HSA. It appears in this list only because the two are so often discussed as one thing that people look for it here.

  How it is taxed

  Depends — see the note below An insurance plan rather than an account, so there is nothing to tax at these stages.

  Who opens it

  Through an employer

  When you can get at it

  Anytime There is no balance — this is coverage, not savings.

Education

The 529 has effectively won this category, and the others are worth understanding mostly so you can rule them out. What makes a 529 unusual among accounts opened for someone else is that you keep control: the beneficiary can be changed, and the money does not become the student’s property the way a custodial account does.

One thing worth correcting here, because the old answer is still repeated everywhere and it changed with the rewrite of the federal aid formula. A grandparent-owned 529 used to hurt a student’s aid badly, because withdrawals counted as the student’s own untaxed income at a punishing rate. It no longer works that way: a 529 owned by someone other than the student or their parent is not reported on the federal aid form at all. And a 529 owned by a dependent student is now treated as a parent asset, which is the gentler treatment. The CSS Profile that some private colleges use is a separate form with its own rules, so this is a statement about federal aid.

• 529 savings plan

  A state-sponsored investment account for education costs: no federal deduction going in, but growth and qualified withdrawals are federally untaxed, and many states add their own deduction. You stay the owner, and you can change who the beneficiary is.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Not taxed Federal treatment shown. A non-qualified withdrawal is taxed only on the earnings portion, as ordinary income, plus a penalty — your own contributions come back untouched. State treatment varies: a number of states offer a deduction or credit for contributions, and the qualified-expense definitions do not always match the federal one. Leftover money can also be moved into a Roth IRA for the same beneficiary, subject to conditions and a lifetime cap of $35,000, which is a fixed statutory figure rather than an inflation-adjusted one.

  Who opens it

  Through a state program

  When you can get at it

  Spend it on the purpose Non-qualified withdrawals are taxable on the earnings, with a penalty.

• 529 prepaid tuition plan

  Glossary page coming soon

  The other shape a 529 can take: rather than investing, you buy future tuition credits at something closer to today’s price, which moves the risk of tuition inflation onto the plan. One structural difference is worth knowing: the savings version can only be run by a state, while the prepaid version can also be run by a group of colleges, which is why a private-college consortium plan exists and a private-college savings plan does not. Which plans accept new enrollment varies by state and changes, so check your own state’s program and read its disclosure.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Not taxed

  Who opens it

  Through a state program

  When you can get at it

  Spend it on the purpose

• Coverdell education savings account

  An older education account with one genuine advantage — it can be spent on a broader range of pre-college costs — and one decisive disadvantage: a contribution limit small enough that most families use a 529 instead. There are also income limits on contributing.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Not taxed As with a 529, a non-qualified withdrawal is taxed on the earnings only, as ordinary income, plus a penalty. It also carries a deadline a 529 does not: the balance must generally be distributed once the beneficiary turns 30, with an exception for a beneficiary with special needs. That is a hard end date, not a required-minimum-distribution rule.

  Who opens it

  Open it yourself

  When you can get at it

  Spend it on the purpose Must generally be emptied by the beneficiary’s 30th birthday.

Disability and long-term support

The problem these solve is specific and brutal: means-tested benefits such as SSI and Medicaid have asset limits low enough that ordinary saving can cost someone their coverage. Both vehicles below exist so that money can be set aside without counting against those limits.

The difference between them is who controls the money and how much can go in. An ABLE account is opened and largely controlled by the person with the disability. A trust is created by someone else, holds much more, and is administered by a trustee.

• ABLE account

  Glossary page coming soon

  A state-sponsored account for someone whose disability began before they turned 46, designed so that savings do not disqualify them from means-tested benefits. Growth and qualified withdrawals for disability-related expenses are untaxed. The age threshold used to be 26 and rose to 46 for 2026 onward, which roughly doubled the number of people eligible, so anyone told they did not qualify under the old rule should look again.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Not taxed Federal treatment shown; some states add a deduction. A non-qualified withdrawal is taxed on the earnings only, as ordinary income, plus a penalty. The qualified-expense definition is broad: it covers disability-related living costs, not only medical ones.

  Who opens it

  Through a state program

  When you can get at it

  Spend it on the purpose Widely misunderstood: the balance is disregarded entirely for Medicaid, SNAP and housing programs. Only SSI has a cap, at a fixed $100,000, and going over it suspends SSI rather than ending it, and does not cost the person their Medicaid.

• Special needs trust

  Glossary page coming soon

  A trust holding assets for someone with a disability without those assets being treated as theirs for benefits purposes. It has no contribution ceiling in the way an ABLE account does, which is why the two are often used together rather than as alternatives.

  How it is taxed

  Depends — see the note below Taxation depends on how the trust is drafted and whose money funded it: a first-party trust funded with the beneficiary’s own assets is treated differently from one funded by a parent.

  Who opens it

  Created by a legal document

  When you can get at it

  Set by the document

Accounts for a minor

The thing to understand before opening one of these is that the money stops being yours. A custodial account is an irrevocable gift: you manage it, but it is legally the child’s, you cannot take it back, and control transfers to them outright at an age your state sets. That is a feature if you intended a gift and a problem if you were expecting to keep discretion.

It also has a consequence people meet too late. Because the asset belongs to the student, the federal aid formula assesses it at a much higher rate than it assesses a 529, roughly three and a half times as heavily. Combine that with the fact that a custodial account cannot be undone, and it is the least aid-friendly way to hold money for a child who will apply for aid.

• UTMA custodial account

  Glossary page coming soon

  The standard way to hold assets for a minor: an ordinary investment account titled in the child’s name with you as custodian, holding essentially any kind of property — cash, investments, real estate, even a patent or a piece of art. No spending restrictions, no tax preference, and the child takes control at the age your state specifies. This is the one you would open today; the older UGMA below is the version it replaced.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing Income is the child’s: interest and dividends are ordinary income each year, and selling an investment at a gain is a capital gain on the amount above what was paid for it. Above a threshold that income can be taxed at the parents’ rate rather than the child’s, the rule that stops these being a tax shelter, and it does not end at 18 — it can reach a full-time student into their early twenties.

  Who opens it

  Opened for someone else

  When you can get at it

  Anytime For the child’s benefit while a minor; theirs outright at the state’s age.

• UGMA custodial account

  Glossary page coming soon

  The older form of custodial account, created under the Uniform Gifts to Minors Act. Mechanically it works like a UTMA and is taxed identically; the difference is what it can hold. A UGMA was limited to financial assets — cash, securities and insurance — while the UTMA that superseded it accepts essentially any kind of property. In practice this is now a historical label rather than a choice, because new custodial accounts are opened under the UTMA. South Carolina, the last state to make the switch, enacted it in 2022 and repealed its UGMA outright, folding the accounts that already existed into the newer act rather than leaving them under the old one. So if a statement of yours says UGMA, that is an older account rather than a different product you picked.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing Identical to a UTMA, including the rule that can tax the child’s income at the parents’ rate.

  Who opens it

  Opened for someone else

  When you can get at it

  Anytime For the child’s benefit while a minor; theirs outright at the state’s age.

• Custodial Roth IRA

  A Roth IRA for a minor who has actual earned income, opened and managed by an adult. Not a separate account type; the interest is that a teenager with a summer job can start one, and decades of untaxed growth is a long runway.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Not taxed An ordinary Roth IRA; the custodial part describes who administers it.

  Who opens it

  Opened for someone else

  When you can get at it

  Retirement age rules

• Trump account

  Glossary page coming soon

  A new account type created by the 2025 tax law, and the clearest way to understand it is that it is a traditional IRA for a child, with special rules until the year they turn 18. Contributions became possible in July 2026, the investments are restricted to low-cost broad index funds during those early years, and there is a separate federal pilot that pays $1,000 into an account for a child born in a window that closes at the end of 2028.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Taxed Contributions made before the year the child turns 18 are not deductible, and the account is otherwise treated as a traditional IRA — so growth is deferred and withdrawals are taxable. Employer contributions can be excluded from your income under a separate provision, but the guidance implementing that has not been issued.

  Who opens it

  Opened for someone else

  When you can get at it

  Retirement age rules Locked until the year the child turns 18, then ordinary IRA rules apply. Most of the detailed regulations are still only proposed, so specifics may change.

Taxable investing

A brokerage account has no tax advantages and no rules about when you can have your money, and those two facts are related — the restrictions on tax-favored accounts are the price of the tax break. For anything you might need before retirement, or for saving beyond what the favored accounts will take, this is where it goes.

• Brokerage account

  The general-purpose investment account: put money in, buy investments, sell whenever you like, take it out whenever you like. No contribution limit and no withdrawal rules — you simply pay tax on income and gains as they occur.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing Growth is taxed when it is realized: when you sell at a gain, or receive dividends or interest, not annually on paper gains. You are taxed only on the gain above what you paid, and if you held the investment more than a year that gain is taxed at long-term capital-gains rates, which are lower than ordinary income rates. Withdrawing triggers nothing extra.

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• Cash account vs margin account

  Glossary page coming soon

  Two settings for the same brokerage account rather than two types. In a cash account you invest money you have; a margin account lets you borrow against your holdings, which introduces the possibility of being forced to sell at the worst moment.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• Cash management account

  Glossary page coming soon

  A brokerage’s answer to a checking account: bill pay, a debit card and a competitive yield, offered by a firm that is not a bank. Idle cash is usually swept somewhere else overnight, and what insures it depends entirely on where it is swept — to partner banks, which can carry deposit insurance passed through, or into a fund, which does not. That destination is the thing to check.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• Crypto exchange or custodial account

  Glossary page coming soon

  An account with a company that buys, sells and holds digital assets for you. It belongs on this list mainly so that one thing can be said plainly: there is no federal deposit insurance on the crypto, and none of the protections that apply to a bank deposit or to securities at a brokerage reach it. Where a platform holds your dollars at a partner bank, deposit insurance may cover those dollars — it never covers the crypto, and it does not protect you if the platform itself fails.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing Digital assets are treated as property, so selling or exchanging one is a taxable event: a capital gain on the amount above what you paid, at the long-term rate if you held it more than a year. The rules that soften losses elsewhere, such as the wash-sale rule, do not apply in the same way.

  Who opens it

  Open it yourself

  When you can get at it

  Anytime Whether the assets are legally yours or you are simply a creditor of the platform can turn on its terms of service — which is what the 2022 platform failures turned on.

Everyday cash and short-term savings

These are the accounts you actually touch. They differ in yield and in how easily you can get at the money, and — the part that matters most and gets noticed least — in what happens if the institution fails.

• Checking account

  The transactional account: unlimited access, a debit card, direct deposit, and generally little or no interest. Its job is moving money, not growing it.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing Any interest is ordinary income in the year you earn it, not capital gains.

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• Savings account

  A deposit account meant for money you are not spending this week. Traditional bank savings rates are often very low, which is the entire reason the next entry exists as a separate idea.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• High-yield savings account

  The same product with a competitive rate, usually from an online bank with lower overheads. Same insurance, same access — the difference is the rate, and the gap between a big-bank savings rate and a high-yield one is routinely large enough to matter.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• Money market account

  A bank deposit account that often pays a little more than savings and may come with limited check-writing. A deposit account, insured like one — see the note above about the fund with the near-identical name.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• Certificate of deposit (CD)

  A deposit where you commit the money for a fixed term in exchange for a fixed rate. Taking it out early generally costs you some of the interest, which is the trade you are making.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing

  Who opens it

  Open it yourself

  When you can get at it

  Set by the contract Available at maturity; earlier withdrawal usually forfeits interest.

• Money market fund

  An investment fund holding very short-term debt, bought through a brokerage. Frequently used as the place cash sits between investments, and frequently mistaken for a bank account — it is not a deposit and carries no deposit insurance.

  How it is taxed

  Money in: Taxed • Growth: Taxed • Money out: Nothing What it pays you is generally ordinary income each year, not capital gains.

  Who opens it

  Open it yourself

  When you can get at it

  Anytime

• Series I savings bond

  A Treasury savings bond whose rate adjusts with inflation, bought directly from the government. There is an annual purchase cap and a minimum holding period, so it suits money you are deliberately setting aside rather than an emergency fund.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Taxed Interest accrues without being taxed until you cash the bond, and it is then ordinary income rather than a capital gain. It is exempt from state and local income tax. There is also a federal exclusion when the proceeds go to qualified education costs and the conditions are met.

  Who opens it

  Open it yourself

  When you can get at it

  Set by the contract Cannot be cashed at all for the first year; cashing before five years costs some interest.

Annuities

An annuity is not an account. It is a contract with an insurance company, which is why it behaves so differently from everything above. You hand over money and the insurer promises something back.

That promise is the product. Depending on the contract it can guarantee a rate of interest, a floor under your losses, an income you cannot outlive, or a death benefit for your heirs — and those guarantees are real obligations, not marketing. What matters is who stands behind them: an annuity guarantee is backed by the issuing insurance company, not by a federal insurance fund the way a bank deposit is. So the strength of the guarantee is the financial strength of that insurer, which makes the company you buy from part of the product rather than an incidental detail.

They are also the products on this page most likely to be actively sold to you, and the ones where the sales commission is largest. That does not make them wrong for everyone; it does mean the person explaining one to you may not be neutral, and that reading the surrender schedule before signing is the single highest-value thing you can do.

• Fixed annuity

  The insurer credits a stated rate for a stated period. The simplest shape, and the easiest to compare against a CD — the comparison worth making, since the two solve similar problems differently.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Partly taxed Bought with money you have already paid tax on, growth is deferred, and a withdrawal is taxed only on the earnings above what you put in — as ordinary income, not at capital-gains rates, which is a real cost compared with holding the same money in a brokerage account. Bought inside an IRA or a plan, the account’s rules govern instead.

  Who opens it

  Bought from an insurer

  When you can get at it

  Set by the contract Surrender charges typically apply for a set number of years.

• Variable annuity

  The money is invested in subaccounts resembling mutual funds, so the value moves with markets and you carry the investment risk. Fees stack in layers here, and the guarantees that get emphasized in a sales conversation are usually optional riders that cost extra.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Partly taxed Same structure as above: deferred growth, and earnings taxed as ordinary income on the way out rather than at capital-gains rates.

  Who opens it

  Bought from an insurer

  When you can get at it

  Set by the contract

• Fixed indexed annuity

  Credits interest linked to a market index, with a floor that limits losses and caps or participation rates that limit gains. The floor is real; the marketing tends to describe the upside more vividly than the caps that constrain it.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Partly taxed Bought with money already taxed, growth is deferred, and a withdrawal is taxable on the earnings before it touches your original principal. Withdrawals before 59½ also carry a 10% additional tax on the taxable part.

  Who opens it

  Bought from an insurer

  When you can get at it

  Set by the contract

• Immediate annuity

  You hand over a lump sum and income starts almost at once, for life or for a set period. This is the one that most resembles buying yourself a pension, and it is the shape with the clearest job in a retirement plan.

  How it is taxed

  Money in: Taxed • Growth: Nothing • Money out: Partly taxed Each payment is part return of your own principal, which is not taxed, and part earnings, which are ordinary income rather than capital gains.

  Who opens it

  Bought from an insurer

  When you can get at it

  Set by the contract Generally irreversible — you have exchanged the lump sum for the income stream.

• Deferred annuity

  Income starts later rather than now, so the money grows in the meantime. The category most of the shapes above sit inside, distinguished from an immediate annuity purely by when payments begin.

  How it is taxed

  Money in: Taxed • Growth: Not taxed • Money out: Partly taxed Growth is deferred and withdrawals come out earnings-first, so the taxable part is drawn down before your principal — the opposite of how an IRA recovers basis.

  Who opens it

  Bought from an insurer

  When you can get at it

  Set by the contract

Charitable

The defining feature of everything in this group is that the money stops being yours. That is what buys the tax deduction, and it is also why these are not accounts in the ordinary sense: you may keep a say in where the money goes, but you cannot get it back.

• Donor-advised fund

  You contribute to a fund sponsored by a public charity, take the deduction in the year you contribute, and then recommend grants over time. Legally the sponsor owns the assets and has the final say — your role is advisory, which is what the name is telling you. Giving appreciated investments rather than cash is the main tax reason these exist, because you generally deduct the full value without paying tax on the gain. One trap worth knowing: the deduction for people who do not itemize expressly cannot be used for a contribution to one of these.

  How it is taxed

  Depends — see the note below The strip does not apply: the deduction happens when you contribute, and after that the assets belong to the sponsoring charity rather than to you, so there is no later withdrawal of yours to tax.

  Who opens it

  Open it yourself

  When you can get at it

  Set by the document You can recommend grants, but you cannot take the money back.

• Charitable remainder trust

  Glossary page coming soon

  A trust that pays you (or someone you name) an income for a period, with whatever remains going to charity afterwards. Used where someone wants both a stream of income and an eventual gift, often funded with an appreciated asset.

  How it is taxed

  Depends — see the note below Depends on the trust’s terms and what funded it.

  Who opens it

  Created by a legal document

  When you can get at it

  Set by the document

• Charitable gift annuity

  Glossary page coming soon

  A contract with a charity rather than an insurer: you give assets and the charity pays you a fixed income for life, keeping the remainder. Part gift, part annuity, and the income depends on that charity’s finances.

  How it is taxed

  Depends — see the note below

  Who opens it

  Created by a legal document

  When you can get at it

  Set by the document

Trusts and estate wrappers

A trust is not an account you open at a bank — it is a legal arrangement created by a document, which then holds accounts and property. So a trust does not replace the accounts above; it owns them.

The split that organizes the whole category is control. A revocable trust can be changed or undone by the person who created it, which means it offers no protection from their creditors and no tax separation — for tax purposes it is simply them. An irrevocable trust gives up that control, which is precisely what lets it achieve things the revocable one cannot.

• Trust

  The general arrangement: someone transfers property to a trustee to hold for beneficiaries under terms set in a document. Everything below is a variant defined by what those terms say.

  How it is taxed

  Depends — see the note below There is no single answer — taxation turns on the type of trust and its drafting, which is why this dimension is left blank rather than guessed at.

  Who opens it

  Created by a legal document

  When you can get at it

  Set by the document

• Revocable living trust

  A trust you create, control and can revoke during your life, used mainly to pass property without probate and to arrange management if you become unable to act. It does not save estate tax and does not shield assets from your creditors — those are the two things people most often believe it does.

  How it is taxed

  Depends — see the note below Treated as belonging to the person who created it while they are alive, so it changes nothing about their taxes.

  Who opens it

  Created by a legal document

  When you can get at it

  Set by the document Fully reachable by the person who created it.

• Irrevocable trust

  A trust whose terms generally cannot be undone once made. Giving up control is what enables the goals the revocable version cannot reach — moving assets out of an estate, protecting them from future creditors, or holding them for someone who should not control them directly.

  How it is taxed

  Depends — see the note below Varies substantially with the trust’s terms; some are taxed to the grantor and some as separate taxpayers.

  Who opens it

  Created by a legal document

  When you can get at it

  Set by the document

Where equity compensation lands

If part of your pay comes as company stock, you may be looking for it on this page and not finding it. That is deliberate. Restricted stock units and stock options are not accounts — they are forms of compensation. What happens is that they vest or are exercised, and the resulting shares land in an ordinary brokerage account, where they are taxed like anything else you hold there.

An employee stock purchase plan sits closer to the line: it has real machinery, taking after-tax deductions from your pay to buy company stock at a discount. But it is a purchase program rather than a place your money accumulates, which is why it is not listed above. An employee stock ownership plan is the genuine exception, and it appears with the employer retirement plans, because that is what it legally is.

The practical consequence is worth stating plainly: equity compensation usually leaves you holding a concentrated position in a single company, in a taxable account, alongside a salary from that same company. The account is ordinary. The concentration is not.

Things that look like accounts but are not

Several names you may be looking for are missing from the list above, and in each case the reason is the same: they are not containers you open and hold. Knowing which category something falls into is often the answer to the question you actually had.

• A “rollover IRA” is a traditional IRA that happens to hold money from a workplace plan. There is no separate account type, and the tax law does not recognize one.
• A “stretch IRA” is a way of taking withdrawals from an inherited account, not an account. The approach was narrowed rather than abolished — it survives for deaths before 2020 and for several defined classes of beneficiary.
• The education savings bond program is a tax exclusion you claim when you cash in Series EE or I bonds for tuition, not an account you open. The bond is the asset. One condition catches people permanently: the bond has to be registered to an adult, so a bond in a child’s name can never qualify.
• A mortgage escrow account is controlled by your loan servicer, not by you — that is part of its legal definition. You cannot open one, deposit into it at will, or withdraw from it.
• A sweep is a mechanism that moves idle cash somewhere overnight, not a place money lives. The only question worth asking is where it sweeps to, because that determines what protects it.
• A self-custody crypto wallet manages keys. There is no institution holding anything for you, no account agreement, and no one to appeal to if the keys are lost.
• A Keogh plan is a name, not a product. The separate regime for self-employed plans ended in the 1980s, though the word still turns up on tax forms and old statements. What you would open today is simply one of the self-employed plans above.

If you are choosing where to save next

A list this long invites the wrong question. The useful question is not “which account is best?” but “what is this money for, and when will I need it?” — because that pair answers the account question almost by itself. Money you might need in two years does not belong anywhere with a withdrawal penalty, however good the tax treatment looks.

Beyond that, most sensible orderings share the same first two moves. An employer match is the only return here that is not a forecast, so capturing it comes early. And expensive debt is a guaranteed cost, which makes paying it down competitive with almost any investment. After those, the ordering depends on your bracket, your access needs and what is actually on offer to you. The financial order of operations sets out one common sequence, and the guide to personal finance covers where this sits in a wider plan.

Common mistakes

• Treating the account as the investment. Opening a Roth IRA is not investing. Money that arrives in an account and is never invested often sits in cash for years, which is a common and expensive surprise.
• Assuming a custodial account can be taken back. Money put into a UTMA account is an irrevocable gift to the child. They take control at an age your state sets, and they can spend it on whatever they like.
• Believing a revocable living trust saves tax or shields assets. It does neither. Its work is avoiding probate and arranging management if you cannot act — both valuable, and neither of them what it is most often sold as.
• Leaving beneficiary designations to rot. They override your will. A form filled in at a job you left two decades ago still controls that money.
• Mistaking a fund for a deposit. A money market fund is not a bank account, and cash held at a brokerage is protected by a different mechanism from cash held at a bank.
• Opening accounts instead of making decisions. Six scattered accounts from six old jobs is not diversification. It is six sets of beneficiary forms and paperwork to lose track of.

Questions people ask about account types

Most of the accounts above link to a full glossary entry carrying the current figures, eligibility rules and worked examples. You can also browse the whole glossary, which covers the surrounding vocabulary as well as the accounts themselves.