We talk so much about Roth IRAs, 401ks, 403bs, HSAs, etc, I often get questions like “Where else can I invest once I max out my Roth IRA?!”. But let’s not forget, all those fancy accounts are just special TYPES of brokerage accounts. A brokerage account is simply an account that you invest inside of. The US government introduced IRAs, 401ks, 403bs, etc to offer a tax break as an incentive to save for retirement. In exchange you give up some of the flexibility of a regular brokerage account.‎‎
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Just because those accounts exist doesn’t mean you can’t still use a regular old brokerage account which has none of the limits or restrictions of the tax-advantaged accounts. And it’s certainly the place to invest when you’re out space in your tax-advantaged accounts. It might also be the right tool for the job if you’re saving for a shorter term goal.‎‎
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Now let’s talk about taxes. Just because you get taxed on something doesn’t mean you don’t want to do it. i.e. If I can invest $10,000 and turn it into $100,000 the government is going to want to get paid on the $90,000 of gains. Even if they take 20% of those gains, that still leaves me with $82,000. Way better than $10,000! (If that $10,000 was invested inside a Roth IRA you get to keep all $100K though!)‎‎
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Personally, about 93% of my assets are in a regular taxable brokerage account. I have too much money to fit into the tax-advantaged accounts. That’s what we call “a good problem to have”. When I get taxed on the earnings, I pay a lower rate than people who actually work for their money since “earned income” is generally taxed much higher than “capital gains”. (This is your reminder to vote.)⁣‎‎
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As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.‎‎
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– Jeremy‎‎
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