Overview
- Deposit accounts, including high-yield savings accounts, money market accounts, and certificates of deposit, can provide a place for cash savings, emergency funds and short-term goals, with FDIC insurance coverage subject to applicable limits.x
- Tax-advantaged retirement accounts, including individual retirement accounts (IRAs) and 401(k)s, offer tax benefits for long-term retirement savings but come with contribution limits and withdrawal rules.
- Brokerage accounts provide access to market-based investments and flexibility in the types of securities they can hold. Securities in brokerage accounts are not FDIC-insured and are subject to investment risk.
- These account categories serve different purposes and can complement one another rather than act as direct substitutes.
The accounts you use to save and invest your money are not interchangeable. Each type offers a different balance of risk, tax treatment and potential return. Deposit accounts, including high-yield savings accounts (HYSAs), money market accounts (MMAs), and certificates of deposit (CDs), prioritize safety and are FDIC insured.
Tax-advantaged accounts, such as Individual Retirement Accounts (IRAs) and 401(k)s, are designed for long-term retirement savings and come with specific tax benefits and rules. Brokerage accounts can hold securities such as stocks, bonds and funds, offering a broad range of investment options along with market risk. Understanding these differences can help you see the role each type of account may play in your financial picture.
Deposit accounts: savings, CDs, and money market accounts
Deposit accounts can provide a foundation for short- and medium-term savings. At an FDIC-insured bank, deposits are insured up to applicable limits and are not subject to the same type of market fluctuations associated with securities. Depending on the account, the interest rate may be fixed or variable.
High-yield savings accounts (HYSAs)
A HYSA typically pays a higher annual percentage yield (APY) than a traditional savings account. These accounts are commonly offered by online banks and digital-first institutions. The rate is generally variable, meaning it can change over time, while funds remain accessible for withdrawals. HYSAs may be useful for emergency funds, short-term savings goals and cash you want to keep accessible while earning interest. At an FDIC-insured bank, deposits are insured up to applicable limits.
The EverBank Performance® Savings account account is available online nationally with $0 to open, 3.90% APY for new accounts, no monthly maintenance fee and interest compounded daily.x
Certificate of Deposit (CD)
A CD holds your funds for a fixed term in exchange for a fixed interest rate. The rate remains the same throughout the term, which can make a CD useful for savings with a defined time horizon. Withdrawing funds before maturity typically results in an early withdrawal penalty. CDs held at an FDIC-insured bank are eligible for deposit insurance coverage up to applicable limits.
The EverBank Performance® CD offers terms from three months to five years, a $1,000 minimum to open and no monthly maintenance fee.
Money market accounts (MMA)
An MMA can combine interest earnings with features that provide access to your money, such as checks, a debit card or ATM access. Features vary by institution, and rates are typically variable and may be tiered by balance. At an FDIC-insured bank, money market deposits are insured up to applicable limits. An MMA may appeal to clients who want to earn interest while maintaining greater access to their savings.
Tax-advantaged retirement accounts
Tax-advantaged retirement accounts are designed for long-term investment savings and offer specific tax benefits. Depending on the account and provider, the account may hold investments such as stocks, bonds and funds. They also come with rules governing contributions and withdrawals, including annual contribution limits set by the IRS.
Individual retirement accounts (IRA)
An IRA is opened independently, not through an employer. There are two main types:
- Traditional IRA: Contributions may be tax-deductible depending on your income and whether you have a workplace retirement plan. Growth is tax-deferred; withdrawals in retirement are taxed as ordinary income.
- Roth IRA: Contributions are made with after-tax dollars and are not tax-deductible. Qualified withdrawals are tax-free.
IRAs are not FDIC-insured when they hold market-based investments. However, IRAs that hold only bank deposits (such as IRA CDs) may be covered by FDIC insurance under specific rules.
401(k) and employer-sponsored plans
A 401(k) is a workplace retirement plan offered by an employer. Traditional 401(k) contributions are generally made on a pre-tax basis, reducing taxable income in the year of contribution. Some plans also offer a Roth 401(k) option, which allows after-tax contributions and tax-free qualified withdrawals. Some employers also match a portion of employee contributions, depending on the terms of the plan. Securities held in a 401(k) are not FDIC-insured and are subject to investment risk. The investment options available depend on the plan.
Brokerage accounts: cash and margin accounts
A brokerage account allows investors to buy and hold market-based securities, which may include stocks, bonds, exchange-traded funds (ETFs) and mutual funds. Securities held in brokerage accounts are not FDIC-insured, and their value can rise or fall with market performance.
The two most commonly referenced types of brokerage accounts are:
- Cash accounts: A cash account requires you to pay the full amount for the securities you purchase. You cannot borrow from the brokerage firm to fund purchases in the account.
- Margin accounts: A margin account allows you to borrow from the brokerage firm, using the account as collateral, to purchase securities. Borrowed funds are subject to interest and using margin can magnify both gains and losses.
Retirement brokerage accounts (IRAs held at a brokerage)
An IRA can also be opened through a brokerage firm, giving you access to the investments offered by that firm. The account retains the tax treatment, contribution limits and withdrawal rules that apply to the type of IRA, Traditional or Roth.
How the accounts types work together
Each account type serves a distinct role. The comparison below highlights the key differences across FDIC coverage, risk, purpose and tax treatment.
| Account type | FDIC-insured | Primary risk consideration | Primary purpose | Tax treatment |
|---|---|---|---|---|
| High-yield savings account | Yes, subject to limits | Variable interest rate; inflation risk | Accessible savings, emergency fund | Interest generally taxable |
| Certificate of deposit | Yes, subject to limits | Early withdrawal penalties; inflation risk | Fixed-term savings goal | Interest generally taxable |
| Money market account | Yes, subject to limits | Variable interest rate; inflation risk | Savings with transactional access | Interest generally taxable |
| Traditional IRA | No (if market-held) | Market risk | Retirement savings: tax-deferred | Pre-tax contributions; taxed on withdrawal |
| Roth IRA | No (if market-held) | Market risk | Retirement savings: tax-free growth | After-tax contributions; tax-free qualified withdrawal |
| 401(k) | No | Market risk | Employer retirement savings | Pre-tax; taxed on withdrawal |
| Cash brokerage account | No | Market risk | General investing | Taxable gains and dividends |
| Margin brokerage account | No | High market risk | Leveraged investing | Taxable gains and dividends |
These account categories can serve different roles. Deposit accounts can provide liquidity for short-term savings, tax-advantaged accounts are designed for retirement savings, and taxable brokerage accounts provide access to market-based investing outside retirement accounts. Deposit accounts such as HYSAs and CDs are not substitutes for investment accounts; they serve a different purpose.
Making sense of your options
Understanding the differences between deposit, retirement and brokerage accounts can make it easier to match each account with its intended purpose. The key distinctions include how readily you can access your money, whether the account offers tax advantages, whether the balance is exposed to market risk and whether eligible deposits receive FDIC insurance coverage.
For the deposit and savings layer of that picture, EverBank's savings products offer FDIC-insured options with competitive yields and straightforward terms. View current rates for a current look at what EverBank Performance Savings and EverBank Performance CDs are offering today.
Frequently asked questions
What are the main types of investment and savings accounts?
The main categories discussed here are deposit accounts, tax-advantaged retirement accounts, and brokerage accounts. Deposit accounts include high-yield savings accounts, CDs, and money market accounts. Retirement accounts include Traditional and Roth IRAs, as well as employer-sponsored plans such as 401(k)s. Brokerage accounts provide access to market-based securities. Each category has different rules for access, risk, taxes and FDIC insurance.
What are the main types of brokerage accounts?
The two general types of brokerage accounts are cash accounts and margin accounts. In a cash account, you pay the full amount for securities you purchase. A margin account allows you to borrow from the brokerage firm to purchase securities, increasing both purchasing power and risk. Retirement accounts such as IRAs can also be opened at brokerage firms, but an IRA is a tax-advantaged retirement account, rather than a third type of brokerage account.
What are the main types of investment accounts and savings accounts?
A savings account is a deposit product that earns interest. Deposits at an FDIC-insured bank into a savings account are insured up to applicable limits. An investment account can hold market-based securities whose value may rise or fall and are not FDIC-insured. Savings accounts generally prioritize liquidity and principal protection, while investment accounts offer growth potential along with market risk.
How much should I keep in savings versus investment accounts?
The appropriate balance depends on factors such as your goals, time horizon, liquidity needs, and tolerance for investment risk. Deposit accounts are commonly used for emergency savings and money needed in the short-term, while different types of investment accounts are generally associated with longer-term goals and the potential for market growth.
Are bank deposit accounts a type of investment?
No. Bank savings accounts, CDs, and money market deposit accounts are deposit products, not investment accounts. They earn interest and, when held at an FDIC-insured bank, are insured up to applicable limits. Investment accounts hold assets such as stocks, bonds, and funds that can fluctuate in value and are not FDIC-insured. The EverBank Performance Savings, Performance CD, and Performance Money Market are deposit products, not investment accounts.
Related terms
- Annual percentage yield (APY): The total interest earned on a deposit account in one year, expressed as a percentage and accounting for compound interest.
- FDIC insurance: Protection for eligible deposits at an FDIC-insured bank, generally up to $250,000 per depositor, per insured bank, for each account ownership category.x
- Individual Retirement Account (IRA): A tax-advantaged account designed for retirement savings. Tax treatment depends on the type of IRA and applicable IRS rules.
- Brokerage account: A taxable account that holds market-based securities such as stocks, bonds, ETFs, and mutual funds. Not FDIC-insured.
- Certificate of deposit (CD): A deposit account that holds funds for a fixed term at a fixed interest rate, offering predictable returns in exchange for limited early access.
- Tax-deferred: A term describing accounts in which taxes on contributions or earnings are deferred until withdrawal, as with a Traditional IRA or 401(k).
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