Investments Personal Finance Retirement Taxes

Q&A: What type of investment account should I open?

The answer to this question depends on your goals; what do you want to use the money for? When do you want to use it? For an average person who isn’t a business owner, there are 3 main types of individual investment accounts:
Brokerage (Taxable Investment) Account
Traditional IRA
Roth IRA

The following are general reasons and rules of thumb for which account would be best for an individual:

Brokerage (Taxable Investment) Account
-desire to take contributions AND earnings out before age 59.5
-don’t mind double taxation of gains/earnings (after-tax income is invested and gains are taxed when investment is sold)

Traditional IRA
-desire to leave contributions and earnings in until age 59.5
-want to defer federal and state taxes on income (high tax bracket now)

Roth IRA
-desire to take contributions out before age 59.5, but willing to leave earnings in until then
-want to realize federal and state taxes on income (low tax bracket now)

Leave A Comment