Investing 101 for Social Workers

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Disclaimer: This article is for educational purposes only and not financial advice. Please consult a licensed financial professional before making any investment decisions.

I used to think that the only way to invest and become financially independent was that you had to be rich or had access to an employer-sponsored retirement plan. I really had no idea that investing is much less complicated than that.

Anyone can invest, even with as little as $5. There are options to invest for retirement in an employer-sponsored plan or via an independent retirement plan (IRA) when you’re not going through an employer.

There are also alternative investment options like going through a brokerage, investing funds in a health savings account (HSA), or putting a percentage of your money in a money market account – and that’s not even scratching the surface of the topic of investing.

There’s a ton of opportunity and flexibility in how you design your ideal investing strategy. But first, understand what you’re getting yourself into, the goals you have for the money you’re investing, and your level of risk. 

Let’s dig in.

What is Investing?

Investing is when you purchase assets, such as stock and bonds, with the intention to grow that money over time. You may invest in these using tax advantaged accounts, such as an IRA, Roth IRA, 401(k), or other employer-sponsored retirement account. Brokerage accounts and health savings accounts are also other options to use for investing.

The different asset classes that exist for you to invest in include:

• Stocks
• Bonds
• Cash
• Crypto
• Real estate (physical properties and REITs)
• Commodities

Once you buy an asset to make an investment, compound interest is what really makes it take off and build wealth over time. Compound interest is the interest you earn on the interest of your investment. 

Sounds confusing right? To better describe this, imagine you have $100 invested in a certain stock and it earns 7% interest each year. You’d have $107 after 1 year. In 10 years, you’d have $196.72.

If you invested $100 a month on top of your original $100 investment for 10 years, you’d end up at $16,776.45. In 25 years? That number explodes to $76,441.59. See how much just an additional $100 dollars a month changes the projected amount? That’s the power of compound investing. Investor.gov has a Compound Interest Calculator that is a great resource to plug in your own numbers with and see how much you need to invest each month to reach your goals.

Stocks vs. Bonds

When you buy a stock, you’re purchasing a share in a company. This represents partial ownership in a company and when that company performs well and increases in value, so does your stock. If a company performs poorly and loses value, your stock would decrease in value and you could potentially lose money if you were to sell it at a loss. An example of a stock would be Apple’s stock: AAPL.

Bonds are a little different. They don’t represent any sort of equity in a company. Instead, they’re loans you’re giving to a company or the government. You make money off of the interest they pay you for the debt. But if a company were to go bankrupt during the bond period, the interest payments could stop and you could even lose your principal. An example of a bond is the U.S. Treasury 10-Year Note government bond.

Mutual Funds vs. Exchange Traded Funds (ETFs)

Two types of funds that are options for investing are mutual funds and exchange traded funds (ETFs). While mutual funds are actively managed by a fund manager, ETFs are passively managed based on an existing index, like the VOO ETF. VOO tracks the S&P 500 index, which includes 500 of the largest publicly traded companies in the U.S.

ETFs tend to be more tax-efficient with lower expense ratios and lower fees. However, ETFs may not be available when investing with a 401(k), so a mutual fund may be what you have to go with if you’re using a 401(k). For instance, I have ETFs available to me in my IRA and brokerage accounts, but don’t in my 401(k). 

The good news is that more and more 401(k) plans have started to offer ETFs. Check with your employer-sponsored retirement plan for specific information on available funds.

Alternative Investments

Other alternative investments that exist include real estate, commodities (like gold), cash, and cryptocurrency. Cryptocurrency is a newer asset class that can be highly volatile and risky. Since it’s still largely unregulated, approach this type of investment cautiously and don’t invest in anything you don’t fully understand.

New investors should prioritize building a solid investing foundation for long-term gains with tax-advantaged accounts before moving on to alternative investments, but this is a good list to keep in mind when considering your overall strategy.

How to Get Started Investing With Your Employer-Sponsored Retirement Plan

There are 3 types of employer-sponsored plans that exist and the type of plan you have depends on where you work: 401(k), 403(b), and 457(b). Refer to the below table for a brief comparison between the different types.

	401(k)	403(b)	457(b)
Who offers it?	Private-sector employers	Public schools, nonprofits, some churches	State & local governments
2025 Employee contribution limits	$23,000 ($30,500 if age 50+)	$23,000 ($30,500 if age 50+)	$23,000 ($30,500 if age 50+). Some plans allow special catch-up closer to retirement
Employer matching	Common (many employers match contributions)	Sometimes offered, but less common than 401(k)	Rare – usually no employer match
Investment options	Wide range (mutual funds, ETFs, target-date funds, etc.)	Usually more limited, often mutual funds and annuities	Often limited, similar to 403(b)
Withdrawals before age 59½	Usually face taxes & 10% penalty	Same as 401(k): taxes & 10% penalty	No penalty if you leave your job (only taxes owed), which is a unique advantage

If you have an employer-sponsored retirement plan available to you, reach out to your Human Resources (HR) representative to sign up and access their portal. 

If there is a match available, invest at least up to the match amount. That’s basically free money you don’t want to leave on the table. If you have a 401(k), matching will be more common. According to Fidelity, 80% of participants in their 401(k) plans received some amount of employer contribution.

From there, look at your budget to see how much more you want to invest from your paycheck. Maxing out your contributions each year can give you a special advantage for more compound interest potential and may allow you to reach your investing goals faster, but that’s only if your budget can handle it. Don’t forget about other necessities like an emergency fund and other savings.

Many employer-sponsored retirement plans have some basic guidance available for which funds to choose. See if they have any free consults available with a financial advisor at the company the plan is through – some have this feature available for new plan members.

How Can I Save for Retirement Without a 401(k), 403(b), or 457(b)?

If you don’t have access to an employer-sponsored retirement plan, don’t fret! There are still plenty of retirement account options for you, such as Roth IRAs, traditional IRAs, SEP IRAs, and Solo 401(k)s. Refer to the below table for a breakout of these account options.

	Traditional IRA	Roth IRA	SEP IRA	Solo 401(k)
Who can use it?	Anyone with earned income	Anyone with earned income less than $150,000 for single filers or less than $236,000 for joint filers	Self-employed individuals or small business owners	Self-employed individuals or business owners with no employees (other than spouse)
2025 contribution limits	$7,000 ($8,000 if 50+)	$7,000 ($8,000 if 50+)	Up to 25% of compensation, max $69,000	$23,000 employee deferral & up to 25% of compensation as employer, max $69,000
Taxes	Contributions may be tax-deductible; withdrawals taxed in retirement	Contributions made with after-tax dollars; withdrawals in retirement are tax-free	Contributions are tax-deductible; withdrawals taxed in retirement	Contributions can be pre-tax (traditional) or after-tax (Roth, if plan allows); withdrawals taxed or tax-free depending on type
Best for	People wanting tax deduction now and expect lower tax rate in retirement	Younger investors or those expecting higher tax rates later	Self-employed people wanting high contribution limits	Self-employed people wanting flexibility, Roth option, and ability to contribute as both employer and employee

Creating Your Investing Strategy in 5 Steps

Now that we’ve laid out all the options available to you, let’s start putting together a strategy based on your financial goals. If you’re unsure what your financial goals are, book a Money Clarity Session with Taylor to untangle your finances, get support, and get a plan for what to do next.

Step 1: Start with picking a tax-advantaged plan to start with. If you have one available with your employer, start there by going to your HR rep. Then think of what companies and funds you want to invest in, including any socially responsible investing options.

Step 2: After checking with your HR rep about the employer-sponsored retirement plan at your company, choose the funds you want to invest in and set your monthly contribution percentage. This could be 5%, 10%, 20%, etc – whatever makes the most sense for matching and your budget. Follow this same step for an IRA if you don’t have one with your employer, but no matching will be included. 

Pro tip: If your employer has a retirement plan available, chances are they might also have a HSA available. Check with your HR rep or benefits portal to see what’s available.

Step 3: Keep in mind that you should also have an emergency fund of 3 to 6 months and should set aside some money monthly for that as well while investing. We recommend Ally (which is also what Taylor uses) for high-yield savings and money market account options so you can also make money on the money you’re saving outside of your investment accounts.

Step 4: Think of ways you can reduce any high-interest debt you have. Use the free Debt Reset Starter Guide to do this. When thinking if you should pay off debt or invest, the answer is both. Don’t wait to start investing until all your debt is paid. You’ll miss out on gains that would make you more money in the long run, rather than waiting for years to get started.

Step 5: Once you have a more solid financial foundation that steps 1 through 4 give you, then look at other investing options that might be a good fit for you.

Investing for The Long Haul

For any money you invest, think of not touching that money for at least 10 years. This is money that you want to stay in the market and multiply for as long as you can. 

Don’t take out all your money just because the stock market is down or having extreme fluctuations either. The stock market goes through fluctuations often, but it isn’t anything to be alarmed about. Your goal is to invest for the long term and grow your wealth gradually over time. Get your head out of the day-to-day noise and stay focused on your end goal.

For more investing tools and resources to help you:

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