Benefits of Non-Retirement Investment (Brokerage) Accounts

When most people think of investing, they immediately turn to their employer 401k, or maybe IRA accounts. But are there better options?

“Qualified” retirement accounts like 401k’s and IRA’s aren’t the only game in town.
 
Investing for your retirement can also take place outside the conventional qualified account realm.
 
Another option to be considered is regular “Non-Qualified” investing. We’re talking about regular investment accounts with mutual funds, stocks, etc. Below are some benefits these accounts can have that you may not find with your retirement accounts.

1. Liquidity – standard retirement accounts generally require you wait until at least age 59.5 until you can withdraw funds without penalty. Regular investment accounts have no such limitation, which could allow you to retire earlier.
2. No Required Distributions – regular investment accounts don’t force you to take RMD’s (required minimum distributions) at a certain age like most retirement accounts. This allows you to keep funds invested longer without worrying about taxes, etc.
3. Lower Taxes – while retirement accounts have either a front-end or back-end tax benefit, but are either taxed before contribution or after withdrawal, regular investment accounts have the potential to go untaxed. That’s because capital gains taxes don’t start until you hit a certain income level. So if you have a lower income year, or only have social security income in retirement, you may be able to take your capital gains completely tax-free on those regular investment accounts. At the very least, you’ll have reduced capital gains rates.

 
Another possibility with regular investment accounts is donating the funds as your charitable contribution strategy. Here’s more on that – click here.
 
Each situation is unique and should be considered accordingly. Be sure to check with your investment advisor to implement the right strategy for you!