When Should You Choose Taxable Investment Accounts?

When Should You Choose Taxable Investment Accounts?

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[GraceOliviafy]

Tax laws can be so complex, and it’s super helpful to break them down like this. Understanding how different policies can impact our finances is crucial for making informed decisions.

[peacefulyou]

Take advice from a young multi millionaire myself. Use taxable accounts if you know you’re for sure going to get rich before 30 years. If it’s going to take you at least 30 years to make your first $1 million like most everyday working class folks, do tax advantaged accounts so the tax penalty won’t destroy your retirement.

[GhanYt]

With markets tumbling, inflation soaring, the Fed imposing large interest-rate hike, while treasury yields are rising rapidly—which means more red ink for portfolios this quarter. How can I profit from the current volatile market, I'm still at a crossroads deciding if to liquidate my $125, 000 bond/stock portfolio...

[kennethwers]

A brokerage account allows for more flexibility if one decides to retire early it also allows one to qualify for the affordable Care act insurance as withdrawing from a brokerage account is not taxable income.

[rebeltheharem]

It depends how much you think you will get when you retire. If you will retire at 59 and have a lower tax bracket, then tax deferred is better. Always put money into a ROTH IRA if you are going to retire at 59, no matter what.
As for 401K vs brokerage, that honestly depends on how long and when you expect to retire.
Money now is always worth more than money later, so even if you do get into a higher tax bracket, you will likely have made more money than any potential tax increase from it.
What I like to do is calculate how much taxes were deferred when I put money into a 401K. Lets say maxing it out saves you 5K in taxes, that means 5K more in investments every year than normal. So if you are say, 30 years from retirement (you are 29, retiring at 59), that's an additional ~470K in your retirement account. I assume your 401K plan has SP500 and very low account fees.
But the problem with this is that tax rules change all the time on long term capital gains, so you can never really tell for sure where you will land.
At worst, you will be paying 25% for long term capital gains. At best you pay 0%.
I've been doing constant calculations over which way would have the least taxes, and in conclusion, I have decided that a mix of two is the best, that way, when the time comes, you can choose how to withdraw for retirement based on the tax rules at the time.
As a general rule, if you think you are going to get to 1 million before you retire, its best to shift more toward a taxable account and less to a tax deferred.
If you have a ROTH 401K, then always max it out over a brokered account, because it likely works the same as a brokered account except that you pay no taxes when you withdraw.

[daveschmarder-]

If I had saved 45% of my TH pay (I actually did!), I would use a different angle. I would skip (or almost skip) doing a tax deferred plan and instead do a Roth type investment, and a taxable brokerage account. Yes, he would have less TH pay, but would likely do better in the end.
A modification could be to do a tax deferred investment amount to lower the marginal tax rate down one notch. That would take a small amount of research and accounting, but would likely be worth it. This could be done as a DIY project.
In my case, I only had an IRA at first, and starting in 1998 Roth availability. Since 1998, my only contribution was to a Roth IRA exclusively. Now at RMD time, I am thankful for that decision.

[FLOODOFSINS]

This was a totally completely useless video of babbling which they actually never covered the topic

[bryan__m]

45% of gross is a weird way to measure, when, presumably, some of that 45% is taken out before calculating the gross total.

[rayanderson]

Kudos! At that savings rate he will find that although he may right now want to retire at 65ish he will soon come to the realization that he CAN retire much sooner. It is a wonderful place to be. That realization changed my date from 60-62 to leaving as soon as I turn 55 in a few years. That uber savings early on in our career as investors (primarily 401K) PURCHASED me several more years of my life where if I choose to work longer it is on my terms and not because of a lack of funds. He may want that bridge account to make before 59.5 easier from a tax point of view. Kudos again! You are on the right track. - Mutants rule!

[Jlf]

Can a UTMA be transferred to an IRA account when the beneficiary starts working at a job and opens an IRA?

[curtiswfranks]

Can and should I roll my employer match 401(k) contributions into a Roth 401(k) account? I am 29 years old, single, and currently have an annual income which is between 80. k$ and 100. k$, depending on the year, which can (I believe) just barely nudge me into the greyzone marginal tax bracket, although I am expecting my income to be below this threshold in 2022. I am probably not going to retire earlier than 50 years of age, and very well might work even into my early 70s; I am not sure how I want things to go (it also depends on my future career path). I do not know whether it really matters, but I am currently in step 8 of your FOO, although I might need to ratchet that back in the coming years.

[gojl]

Question I didn’t hear is does he and his wife want to start a family and have one of them reduce their working hours. If that’s the case they might want to make sure they are saving in a place they can access the money in the next few years without a penalty.

[afridgetoofar]

I miss the old set. It has a comforting feel to it. This one doesn’t.

[jyo]

Where else youre gonna put extra money into? $6k a year in Roth that you cannot take out at least 25 years later is a trap

[databoy]

Can I just say, it’s really freaking hard watching my 403 balance go down with as much as I’ve poured into it already this year!

[justinlindholm]

It would take 43% of my gross income to max out both 401k and IRA, if I would qualify for an HSA, then that would be closer to 48% of my gross income. So using 45% of your take home income to max them out "Way to go".

[grzegorzszul]

Does anyone know what's the name of Brian's electronic notebook ( he is using it at 1:30 of this video)? Thank you!

[nationsnumberchump]

I'd save that much if companies actually paid in my industry

[davidpowell]

As to early withdrawals (before age 59 and 1/2 or whatever it is) isn't Roth IRA better than tax deferred?

[livingunashamed]

If I was him I would just hit coast fire (fat fire level) and just enjoy life after that :).