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Financial Learning Center


Mutual Funds

Retirement Plans and 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.

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Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA (Opens in a new Window)/SIPC (Opens in a new Window).  UniVest Financial Services is a trade name of UniBank. Infinex and UniBank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of, nor guaranteed or insured by, any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.