The Benefits of Having a Taxable Individual or Joint Brokerage Account

You’ve probably heard of IRAs, 401(k)s, and other tax-advantaged accounts, but have you ever considered opening a taxable brokerage account? Whether you’re a novice or an experienced investor, there are compelling reasons to add this financial tool to your arsenal. Here are some of the key benefits:

It’s Easy to Set Up

First of all, setting up a taxable brokerage account has never been easier. Whether you prefer to go digital or seek the counsel of a financial planner, the process is straightforward. Online platforms often offer an intuitive experience with just a few clicks. Fill out some personal information, link a bank account, and voila! You’re ready to start investing. If you’re not comfortable doing it yourself, a quick meeting with a Franics financial planner can guide you through the process, helping you make informed decisions right from the start.

Favorable Tax Rates for Long-term Investments

When it comes to taxes, not all investment gains are treated equally. If you hold an investment for over a year before selling it, the profit you make is considered a long-term capital gain. Long-term capital gains are taxed at federally fixed rates of 0%, 15%, or 20%, depending on your taxable income. In comparison, short-term gains (from assets held for less than a year) are taxed as regular income, which could be much higher.

The same advantageous rates apply to qualified dividends—these are dividends that meet certain criteria laid out by the IRS. Like long-term capital gains, qualified dividends are taxed at 0%, 15%, or 20%. This means you could end up paying less in taxes by holding onto your investments for the long term.

Flexibility: Contributions and Withdrawals

Unlike traditional retirement accounts like 401(k)s and IRAs, taxable brokerage accounts come with no strings attached in terms of contributions and withdrawals. There are no limits on how much you can contribute each year, and you won’t face early withdrawal penalties if you need to cash out before a certain age.

This flexibility is particularly beneficial for those who want to invest without feeling boxed in by rules and restrictions. Your money isn’t locked away until retirement; you can access it anytime you want or need to, without any penalties or hoops to jump through.

Versatile Financial Goals

Here’s the cherry on top: a taxable brokerage account can be a vehicle for achieving various financial goals. Whether you’re eyeing a new car, planning to make a down payment on a house, or even looking to supplement your retirement income, this account can help you get there. You can earmark your investments for short-term, medium-term, or long-term objectives, offering you a broad range of options that a retirement account can’t provide.


Similar to how diversification has become a cornerstone of sound investment philosophy, tax diversification can provide the same type of benefit.  Adding a taxable brokerage account to your balance sheet can be an excellent way to provide additional flexibility and control when it comes to managing your financial affairs.  Its ease of setup, favorable tax treatment for long-term capital gains and qualified dividends, and unparalleled flexibility make it an attractive option for investors at all stages of life.

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