• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Redwood Wealth Management

A fee-only, independent advisory firm

  • About Us
    • Our Team
    • Our Philosopy
    • The Personal Side of Redwood
  • Services
    • What We Do
    • Case Studies
  • Resources
    • Newsroom
    • Market Reviews
    • Careers
  • Client Login
    • Client Login
    • Fidelity Investments
    • TD Ameritrade
  • Contact Us
  • Form CRS

The Value of Brokerage Accounts

July 17, 2020 by Pierre Sorée

Why complement Retirement investment accounts like 401(k)s, IRAs, Roth IRA’s with a Brokerage account– otherwise known as taxable investment accounts?

The short answer is:  Flexibility!  Here are some of the advantages that investing in Brokerage accounts provides:

  • There are a multitude of investments available in Brokerage accounts including stocks, mutual funds, ETFs, and other assets
  • Unlike retirement accounts, which have limitations on contributions each year as well as age-based withdrawal constraints, Brokerage accounts allow investors to contribute and to withdraw money when they want. As a result, Brokerage accounts may be utilized as a vehicle for not only retirement goals but also for other financial planning goals such as a down payment on a home, purchasing a car, or maybe a home renovation project
  • Brokerage accounts do not have the same tax benefits as:
    • Traditional IRAs and 401(k)s – which enable investors to defer taxes until withdrawals are taken in retirement at then current income tax rates
    • Roth IRAs, Roth 401(k)s and Health Saving Accounts – which allow investments to grow tax free as well as to be withdrawn tax free
  • Brokerage accounts are taxed when investments make money, such as when a stock is sold for a mutual fund capital gain or dividends are paid.  The tax rate depends on the type of transaction.  However, for long term investors capital gains tax rates for assets that are held for more than a year are taxed at either 0%, 15% or 20% (depending on your taxable income and filing status).  As this tax rate typically falls between tax free assets like Roth accounts and tax deferred assets when withdrawn, it creates yet another opportunity for flexibility through a tax savvy withdrawal strategy in retirement.
    • Nobody (well, almost nobody) likes to see their investments lose value in a market downturn. With a brokerage account, however, there is a silver lining in the form of tax loss harvesting:
      • Selling an investment at a loss and then buying a similar investment (to maintain your long-term investment strategy intact)
      • Realizing a tax loss that will i.) offset against gains; and/or ii.) reduce taxable income up to $3K/yr
      • Strategy makes the best out of a down market/investments to save real dollars on taxes

    Please feel free to contact a Redwood Wealth Manager or Financial Planner for more information or to discuss your specific financial planning goals and/or questions.

Share this:

  • LinkedIn
  • Twitter
  • Print
  • Facebook

Primary Sidebar

Recent Posts

  • Divorce & Taxes
  • Redwood Investment Update – The Stock Market, Vaccine, and Robinhood
  • Missie Beach Quoted in Bankrate.com – A New Look at the Emergency Fund
  • Year-End Tax Planning
  • Insights for Open Enrollment for 2021 Company Benefits

Categories

  • Education Planning / 529s
  • Emergency Funds
  • Estates & Trusts
  • Facts & Info
  • Financial Planning
  • In The News
  • Investments
  • Market Reviews
  • Newsletters
  • Open Enrollment
  • Retirement Planning
  • Risk Management
  • Social Security
  • Taxes And Tax Planning
  • The Basics of Financial Planning
  • Uncategorized
  • Wealth Management

Footer

200 Milton Park
11175 Cicero Drive, Suite 510
Alpharetta, GA 30022
(P) 678-390-3300
info@redwoodwm.com

Subscribe

  • Sign up for the Redwood Wealth Management newsletter.

Recent Articles

Divorce & Taxes

Redwood Investment Update – The Stock Market, Vaccine, and Robinhood

Missie Beach Quoted in Bankrate.com – A New Look at the Emergency Fund

Year-End Tax Planning

  • Site Map

All Content © 2009-2021 Redwood Wealth Management, LLC

Website by SangFroid Web Design