A Taxable Brokerage Account May Be What Your Retirement Is Missing
You can supplement your retirement nest egg or save for other goals with a taxable brokerage account.
For many, funding a 401(k), IRA or other retirement account is the first order of business as they save for long-term goals, and for good reason: These accounts offer significant tax benefits.
But tax-advantaged retirement accounts come with restrictions on how much you can contribute and at what age you can make withdrawals without penalty. A taxable brokerage account adds some flexibility to your mix of investments.
Tax treatment and withdrawal rules
In a taxable brokerage account, you pay tax on interest, dividends and capital gains in the year you receive them.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Capital gains from investments held for a year or less are generally taxed at your ordinary income rate, which can be as high as 37%, while gains on assets held for more than a year are taxed at rates ranging from 0% to 20%, depending on your income. There are no tax deductions for contributions to taxable brokerage accounts.
You don't pay taxes on investments in a tax-advantaged retirement account, however, as long as the money remains in the account. With a traditional IRA or 401(k), you get an up-front tax break on contributions and pay income tax on withdrawals.
With a Roth account, you pay income tax on your contributions, but distributions are tax-free in retirement.
Although taxable brokerage accounts don't offer special tax benefits, you won’t have to worry about contribution limits. So if you're maxing out your retirement plan, a taxable account can be a good place to direct extra savings.
In 2025, the most you can contribute to a 401(k) is $23,500 if you’re younger than 50. Workers ages 50 to 59 or 64 or older can contribute an extra $7,500, and those between 60 and 63 can make catch-up contributions of up to $11,250. The maximum IRA contribution in 2025 is $7,000 ($8,000 if you’re 50 or older).
Thinking of retiring early? You can withdraw money from a taxable brokerage account anytime without facing penalties, so funding a taxable account can provide you with savings to live on until you can tap your retirement accounts.
If you withdraw money from a traditional IRA or 401(k) before you turn 59½, you'll pay a 10% early withdrawal penalty in most cases. (With a Roth IRA, you can withdraw contributions anytime without penalty, but you must own the Roth for at least five years and be 59½ or older to avoid penalties on investment earnings.)
With both taxable brokerage accounts and Roth accounts, you don’t have to take required minimum distributions. If you have a traditional IRA or 401(k), you must take RMDs once you reach a certain age – currently, it's 73 – even if you don't need the money.
Depending on the size of your account, an RMD could push you into a higher tax bracket.
Along with rounding out your retirement portfolio, you can use a taxable brokerage account to save for a variety of other goals, says Cody Garrett, a certified financial planner and founder of Measure Twice Money. You might, for example, invest money to buy a car or a house in a few years.
Getting started
You can open a taxable brokerage account at major brokerage firms such as Charles Schwab, Fidelity Investments and Vanguard; many large banks also offer the accounts through their investment services.
You usually pay no fee to open a brokerage account, and many don't require a minimum investment.
Some firms impose annual account service fees, but they may be waived if you meet certain requirements, such as signing up to receive electronic statements or investing a minimum amount of assets.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Ella Vincent is a personal finance writer who has written about credit, retirement, and employment issues. She has previously written for Motley Fool and Yahoo Finance. She enjoys going to concerts in her native Chicago and watching basketball.
-
I Retired at 65 With $7.8 Million and Feel Like I Over-Saved. My 40-Something Son Is on the Same Path. Should I Tell Him to Reconsider?We ask financial experts for advice.
-
Deciding on Senior Living? 10 Things You Should KnowSenior living options are no longer God's waiting room.
-
I'm a Financial Pro: This Is How You Can Guide Your Heirs Through the Great Wealth TransferFocus on creating a clear estate plan, communicating your wishes early to avoid family conflict, leaving an ethical will with your values and wisdom and preparing them practically and emotionally.
-
To Reap the Full Benefits of Tax-Loss Harvesting, Consider This Investment Strategist's StepsTax-loss harvesting can offer more advantages for investors than tax relief. Over the long term, it can potentially help you maintain a robust portfolio and build wealth.
-
Try This One-Minute Test to Uncover Hidden Health RisksFinding out this little-known fact about your body could reveal your risk of heart disease and more. It's a simple, free check for healthy aging.
-
Child-Free Cruises Perfect For Your Retirement CelebrationHow to find a bespoke ocean or river vacation for adults. Many of these options are smaller, charming river cruises, expeditions, or niche experiences.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.