Only half of Americans are participating in some way in the stock market. When it comes to millennials, 60% have no direct or indirect exposure to the stock market. Most financial experts recommend that before you jump into the market, you need to save up three to six months of living expenses and that you regularly contribute 15% of your income to a retirement account.
If you have checked both those boxes and still have some money left over at the end of the month, it can be tricky to determine what to do with it. Should You Invest In A Roth IRA or Brokerage Account? We will find our what provides you with the most money at the end of the day. Enjoy! Add me on Instagram: beck.zack
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Should You Invest In A Roth IRA or Brokerage Account?
When it comes to investing for your future, there are several options to consider. Two popular choices are the Roth IRA and the brokerage account. Both have their advantages and disadvantages, so it’s important to weigh the pros and cons of each before deciding which one is right for you.
A Roth IRA is a retirement savings account that allows you to invest in a variety of assets, such as stocks, bonds, and mutual funds. One of the main benefits of a Roth IRA is that the money you contribute to the account is taxed upfront, so when you withdraw the funds in retirement, you won’t owe any taxes on the earnings. This can be a significant advantage if you expect to be in a higher tax bracket in retirement.
Additionally, with a Roth IRA, you have the flexibility to withdraw your contributions at any time without facing penalties or taxes. This can be especially appealing for individuals who want access to their funds before reaching retirement age.
On the other hand, a brokerage account is a general investment account that gives you the freedom to invest in various financial instruments, including stocks, bonds, and ETFs. Unlike a Roth IRA, there are no restrictions on how much you can contribute to a brokerage account, and you can withdraw your money at any time without facing penalties.
However, with a brokerage account, your investment earnings are subject to capital gains taxes. This means that if you sell an investment for a profit, you will owe taxes on the earnings. In addition, if you receive dividend income from your investments, you will also owe taxes on that income.
So, which one should you invest in? The answer largely depends on your financial goals and retirement plans. If you are primarily focused on saving for retirement and want to take advantage of tax-free withdrawals, a Roth IRA may be the right choice for you. On the other hand, if you want more flexibility with your investments and don’t mind paying taxes on your earnings, a brokerage account may be a better fit.
In an ideal world, it would be beneficial to have both a Roth IRA and a brokerage account to diversify your investments and take advantage of the unique benefits each account offers. However, if you have to choose one, consider speaking with a financial advisor to help you make an informed decision based on your individual financial situation and goals.
In conclusion, both Roth IRAs and brokerage accounts have their own advantages and disadvantages, so it’s important to carefully consider your options before making a decision. Take the time to assess your financial goals and consult with a professional if necessary to determine which investment vehicle is best for you. Investing in your future is an important decision, so make sure to do your research and weigh the pros and cons before taking the plunge.
Great video even though the math seem off
Very good clear video! Exactly what I needed. God bless you
Exactly the information I was looking for — comparing the outcomes. Thanks so much!
Why are the dividends getting taxed at 25%? Long term capital gains is 0% up to $97k in 2023
Both 100% tax free in a Roth IRA. Tax loss harvesting in a taxable brokerage account. Tax loss harvesting you offset capital gains with capital losses and write off up $3000 in capital losses against other income.
What if i have a pension taking 15% , should i still use a Roth ira?
I faced a loss of over $80k when the market took a downturn. It wasn't due to being in an exchange that collapsed; I made the mistake of holding on because that's what everyone advised. I take full responsibility for it. However, this experience taught me to become a more informed investor, understanding the potential pitfalls. After more than two years in the market, I'm grateful to have found a source that helps me recover at least $10k in profits weekly. Thanks, David Marvin Willis
you;ve got your facts wrong on whether gains in a roth ira are taxable. thumbs down edit: well, later in the video you got the facts right. but still…
Do both Roth/Roth 401k if employer offers AND Brokerage account. Brokerage have no investment limits.. put as much as you want per year. Also provides more flexibility than any retirement account. Ideal to do both.
I use roth in my brokerage to invest and i also use my roth 401k.
Can my wife and i both each have our own individual roth ira in Fidelity??
I came for the brokerage information but the 401K information was very valuable. I have one that I max out, but I didn't have knowledge to know to invest it. 🙁 Slowly but surely, I am getting there. Thanks!
Thank you, I have a better understanding of these accounts. Working towards being debt free. Knowledge is key
OMG I Like ZACK BECK! I love his positive energy about investing, it's motivational….and it's electric LOL
Doing both!
I've watched several videos, and this is the first one I was fully able to understand. Extremely helpul, and much appreciated!
The answer is both. Invest in both.
It seems like if you just a little money to invest, it would be better to choose a tax advantaged account, such as the IRA or 401k. But if you have a lot of money to invest, then you can max out the traditional accounts and diversify with a brokerage.
should I be debt free first IF that debt is 0% APR fixed?
Thank you so much for this, its very much needed for education.
Great video!
One problem, nobody wants to retire at 60, brokerage account all the way
What do you mean by this statement: You dont want to have a Roth IRA or 401k open and leave them open & put money in there & not grow over time (inflation)? Don't IRAs and 401ks automatically grow over time (especially with a good index fund in there)?
I liked your illustration, in the first example, what if he took out less than 80k a year from brokerage account in capital gains? Wouldn't that qualify for 0% tax at this time?
very helpful. thank you
I maxed out my 401k and IRA. I opened up a brokerage account with Charles Schwab. What’s your thoughts on SWPPX? Should I throw $500 into that fund by itself or split that into 3 or 5 funds?
This is the best explanation I've found so far on the internet; Thank you so much !! Unfortunately I started backwards. I got suckered into Robinhood for their 4.4% APY haha. But next week I'm going into the bank and opening an IRA account. Would anyone happen to know which IRA would be best if I want to use that money a couple years down the year for a house purchase? I've heard that Roth IRA would have a 10% penalty for withdrawal, but that's still less than the taxes from gains on a brokerage account. Any suggestions? I bank with $BAC.
S&P 500 qualified dividend is like 15%. Long term capital gains tax is 15%, maybe 0% depending on income. Difference isn’t that huge.