Why taxable brokerage accounts are worth it
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- เผยแพร่เมื่อ 30 ก.ย. 2024
- Taxable brokerage accounts come in handy for several expensive expenses before retirement, but sadly we don’t get a tax break on this one. I'm breaking down why it's worth building your wealth in a taxable account while also contributing to other retirement accounts.
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Can you address Jake broe's 401k video, "your 401k is a waste of time"? He says brokerage accounts are preferred over a 401k even with the tax advantages.
Great content! The flexibility makes this a wonderful place to save and invest. But Pres. Biden's proposals to raise capital gains taxes gave me a scare this week. No, his proposal didn't apply to me, but it showed me just how easy it is to change the rules on this account. I'll need a good amount of money here, but hopefully not more than I need!
Or retire early who wants to work with 59 1/2
if your Roth contribution has been in a Roth for 5 years you can pull it out for a home purchase or for whatever is u want. just not the gains. also with an HSA if you have been saving medical receipts you can also pull out funds tax free for purchases (obv a little more complicated bc you need to have paid for medical expenses with after-tax dollars)
You contributed $1,675/month on a $3,000 gross monthly income????????????????????????????? We seriously need a REAL person to start making these types of videos.
I was also wondering about the numbers. But i think you meant $5000 gross or maybe you meant her net was $3000.
She said she did 60k per year + 12000 yearly part time.
She's correct ✅
Is 100% VT in a taxable brokerage okay? I am 34.
Nah it’s better to split out international funds so you can maximize the foreign tax credit
@@steftrando VTI + VXUS
There are different stategies. I use the bogleheads 3 fund portfolio. There are 2 fund portfolios and other ones. Shop around and see which one fits you
Totally agree with having a nice taxable account. I actually accidentally prioritized my taxable account ahead of some retirement accounts and am happy to have about $100k in it, and have from time to time used some funds for nice purchases for myself, plus its a nice safety cushion in addition to cash. It is generating over $2500 a year in dividends and I am now doing more into retirement accounts. Just nice to have, even if its not super tax efficient and makes me feel more wealthy than just having retirement accounts.
Good advice
Screw retirement do brokerage. Okay thanks
I keep hearing that in brokerage accounts, the dividends are taxed yearly even if you're not pulling money out of the account. Does that also mean that your gains are getting taxed yearly even though you're not pulling money out? Or will I get long-term capital gains tax on the brokerage only when I pull money out? My plan is to invest in index funds with my brokerage account. Thank you for clarifying!
You only pay capital gains when you sell the particular investment. So if you sell one index fund or ETF and buy another, you'd pay taxes on the gains of whatever you sold (even if you left the money in the account). Also the length of time you owned the investment determines the tax rates; i.e. if you hold an investment for over a tear before you sell it, you pay a lower tax rate (possibly even 0%) than one you held for less than a year.
@@tech529 thanks for the reply! Sounds like it's taxed identical to individual stocks; not taxed until I sell. My plan is to keep an index fund and not sell for many years, and I don't think I get dividends on index funds, so there shouldn't be any tax for me until I sell some/all of it. If I'm wrong, please let me know.
The other guy answered the question wonderfully, but know that most index funds to pay dividends. VTI or VOO is right around 2% annually. These will be taxed anannually, but no capital gains unless you sell. A mutual fund index fund could have pass-down capital gains you could be taxed on, but ETFs usually do not (the fund has rebalanced and has a capital gain that is then passed to investors).
@@DallinBunnell Thank you! How can this be taxed if I do not sell them? Are only the dividends (even if reinvested) taxed?
@taylorvice1610 dividends will always be taxed. If they're qualified dividends they're taxed lower than ordinary dividends, which are taxed as ordinary income.
ETFs are traded like securities and so are taxed with capital gains only when the ETF gets sold based on NAV. Mutual Funds can have built in capital gains and are sometimes paid out as taxable distributions.
How much are you taxed on these brokerage accounts though
What fund(s) should I hold in my Vanguard brokerage account?
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Can you do a BACK DOOR ROTH for a Taxable Brokerage Account???
No because a Backdoor Roth IRA is a tax-sheltered account whereas a taxable brokerage account is not!
A majority of Americans, at least 80%, cannot comfortably afford to invest ~$33k/yr into retirement accounts. Average networth across ages barely break $1M at the highest with a majority of the worth tied up in illiquid non cash flowing primary residence and retirement accounts. I don’t understand the general consensus to max out retirement accounts as this does not apply to most Americans. Not to mention they never factor in alleviated debt or Social Security as part of the retirement strategy.
First, I wouldn’t focus on what the majority of people are doing, but if your goal is to build wealth and financial independence, focus on yourself individually, next I would focus on growing your income, example from a minimum wage job to a job that was 1.5x (CNA with a 6 week certification) then 4x (RN with a BSN) then 13x (CRNA) that initial minimum wage pay in a span of 10-12 years. It will take dedication, focus, strategy, excellence (very competitive but attainable to get into BSN and CRNA programs if you give it 100%. CRNA one the best jobs in the US imo. I’m personally mid 30s, just getting started on my financial independence journey and this is the exact content I need at this time of my life. Obviously, this is content doesn’t apply to the exact “average” American, but it is something to strive for one day and attain, so content like this is valuable to people like me and you to keep under your belt for when the time is right. Wish you the best. As David Goggins says be uncommon amongst uncommon people (be elite amongst the elite in whatever you do). You can do it too.
We live on a single teacher salary and we are maxing two Roth IRAs. Maxing 403b and then any extra money goes on o taxable brokerage.
Deducting contributions to IRA's doesn't help someone who is a low tax bracket as much as it does a high earner. Taxes can be avoided from taxable accounts by selecting funds with capital gains instead of dividends. Even then, qualified dividends are treated favorably.
You still pay taxes on interest income even if you have a taxable account that pays at the long term capital gains rate.
@@jwanders10 I'm talking about Qualified Dividends being taxed at favorable rates. Capital Gains are never taxed unless you sell the stock and if held for more than a year they are also taxed favorable rates. Roth is great for REIT's and Covered Call's because you receive current income tax free in your retired years.
@@kevinhuff thank you for clarifying.