After maxing out their 401(k) retirement plans, investors have three choices for investing additional savings. They are a Traditional IRA, Roth IRA, or taxable brokerage account. The taxable brokerage account is by far the most flexible. There are no contribution annual contribution limits and investors may withdraw funds at any time without penalty which is useful if an investor plans to retire early. As the name suggests however, withdrawals and investment earnings are taxable. Certain dividends and long term capital gains are however taxed at concessional rates.
- After maxing out your 401K, it’s advised to invest in a brokerage account due to it’s flexibility.
- Brokerage accounts are also great since they allow for tax diversification during retirement.
- Other beneficial options aside from a brokerage account include a Traditional IRA and a Roth IRA.
“There are various pros and cons with each type of investment account. Depending on your situation, goals, and the amount you’re looking to invest, you may be able to utilize more than one.”