While there are a wide array of investment accounts available to investors, one of the most common for employees is the 401(k). This account, which is the hallmark of the 澳洲幸运5官方开奖结果体彩网:defined contribution retire🐲ment plans that most employers provide, allows investors to make reti⛎rement contributions on a tax-deferred basis and direct the investment of those funds.

Though the range of investment options available in a 401(k) varies🐟 from plan to plan, there is nearly always an interest-bearing option available. The following are some of the most common types of securities that generate interest income for 401(k) owners.

Types of Investment Accounts

Certificates of Deposit

These securities, frequently referred to as CDs, are issued by commercial banks and pay a preset rate of interest over the term of the agreement. The Federal Deposit Insurance Corporation (FDIC) often acts as a guarantor of these securities, which makes them quite attractive to low-risk investors.

Money Market Funds

These funds seek to generate returns by investing in short-term securities, generally those with terms of less than one year, that relate to the 澳洲幸运5官方开奖结果体彩网:money market at large. While returns from 澳洲幸运5官方开奖结果体彩网:money market funds can involve an eꦉlement oඣf capital gain, proceeds from earned interest are the primary component.

U.S. Treasury Bonds

Long regarded as one of the safest investments in the world, U.S. Treasury bonds (T-bonds) provide investors with recurring, semiannual interest income through direct ownership or a mutual fund. It is worth noting, however, that investors only earn a bond’s yield to maturity if the bond is actually held through to maturiღty.

Corporate Bonds

Like U.S. T-bonds, corporate bonds provide investors with recurring interest income. However, 澳洲幸运5官方开奖结果体彩网:the default risk associated with corporate bonds varies significantly bꩵy the issuer. Because of this, investors need to conduct a thorough review of any corporate bond security before investing directly or through a mutual fund.

Stable Value Funds

澳洲幸运5官方开奖结果体彩网:Stable value funds are low-risk investments that provide a steady return. Similar to money market funds, these funds invest in 澳洲幸运5官方开奖结果体彩网:guaranteed inv🎃estme🦩nt contracts (GICs) issued by insurance companies.

Benefits of an Interest-Bearing 401(k) Account

The maximum contribution an individual can make to their 401(k) account in 2023 is $22,500, rising to $23,000 in 2024. Those 50 and older can add $7,500 for both 2023 and 2024.

If your employer offers even a 1% match on your contribution, that can mean substantial growth in the long term thanks to compound interest. The gains you s🍎ee are interest gains on interest and are considered the gold standard of responsible and intelligent investing.

The Bottom Line

401(k) plans invest your contributions into mutual funds; these funds invest in a wide assortment of assets. You can select which funds your money goes into and therefore can choose the types of assets you're exposed to. Generally, equities will bring in the most growth but also carry the most risk. Choose the right allocation based on your risk tolerance and how close you are to retirement.