Taxable brokerage account in addition to an IRA
You need to have a taxable brokerage account in addition to IRA as these accounts aren’t sufficient for all of your investing needs. While they’re perfect for retirement savings, you likely have things you want to do before you reach your golden years. Retirement accounts have some significant drawbacks if you try to use the money for anything other than retirement. You could wind up paying massive penalties and incurring substantial tax bills.
By contrast, taxable brokerage accounts are far more flexible. They don’t offer the entire tax incentives retirement accounts do. If you expect to need any significant chunk of money before you retire, that makes them an essential part of your savings plans.
IRA Drawbacks
Individual Retirement Accounts (IRAs), come with their own disadvantages.
Income Requirements for Tax Deduction
You need a taxable brokerage account in addition to an IRA, if you earn too much; any contributions you make won’t be deductible. If you want to deduct the money from your taxes, you have to meet specific income requirements. For a single person or a head of household, you can only deduct the full amount if you make less than $64,000. It starts to phase out when your income is between $64,000 and $74,000. Beyond $74,000, you can’t deduct any of your contributions to an IRA.
If you’re married and filing jointly, you can deduct the full amount if you’re joint income is $103,000 or less. The deduction phases out completely at $123,000. If you’re filing separately, it phases out completely at just $10,000 in income. You cannot take a full deduction.
Contribution Limits
The contribution limit is $6,000, in 2019. If you’re at least 50, you can add an extra $1,000. Remember, you might not be able to deduct the full amount you contribute based on IRA income requirements. For Roth IRAs, you don’t get to make upfront deductions, so the IRS limits your contributions based on your income. For 2019, single people and heads of household can make a full Roth IRA contribution if they make less than $122,000.
Penalties on Early Withdrawals
Traditional IRAs charge 10 percent of the withdrawn amount, plus taxes on the withdrawn amount.
You Must Take Mandatory Distributions
Traditional IRAs are also subject to the same mandatory distributions as 401(k) s, which can complicate your tax planning. You need a taxable brokerage account, which can be set up to help people invest for goals other than retirement. While you won’t get a tax incentive for using one, they don’t have all of the rules and regulations retirement accounts have.
There are No Income Requirements
There are no income requirements related to opening a taxable brokerage account in addition to the IRA. Although some brokerages have minimum deposit requirements, all you need to get started is enough cash to buy your first investment.
There are no Contribution Limits
You need a taxable brokerage account in addition to IRA as you can deposit as much cash you want to. If you have a lot of extra cash, that makes it easy to invest as much of it as you’d like as quickly.
Unlimited Investment Options
Typically, IRAs only offer a small selection of mutual funds. With a taxable brokerage account in addition to IRA, you can invest in anything. Name it stocks, bonds, options, futures, precious metals, commodities, Forex, and more. Therefore, you need a taxable brokerage account in addition to the IRA.
Early Withdrawals charge No Penalties
You need a taxable brokerage account in addition to IRA is possible because the most crucial benefit it offers. Possibly the most crucial benefit of taxable brokerage accounts is that you can make a withdrawal whenever you like. All you have to do is sell enough investments to cover the amount you want to withdraw. You will have to pay capital gains taxes, but there are no penalties to worry about.
There are No Mandatory Distributions
You need a taxable brokerage account in addition to IRA if you don’t have the required distributions. That means you can keep your money invested long past the time you turn seventy and a half years. That makes it easier to plan your taxes and leave your investments to grow for future generations of your family.
