BENEFITS OF A TAXABLE BROKERAGE ACCOUNT

You can supplement your retirement nest egg or save for other goals.

- ELLA VINCENT

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. 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.