Today's DueNorth Insight - Brokerage Accounts

Today's DueNorth Insight - Brokerage Accounts

August 04, 2021

In today’s DueNorth Insight we’re going to talk about what a brokerage account is. So what is a brokerage account? Sometimes you might hear this called a non-retirement account or a taxable account. And really what it is, is it’s an account that serves the purpose to grow and invest your money outside of your specific retirement assets.

So a few things about a brokerage account, it can be individual so you can solely own a brokerage account or it can be joint so a lot of times you’ll see spouses who are joint tenants on a brokerage account. And so what they do is they’ll contribute money to this account and then invest it – typically in stocks, bonds, mutual funds, and ETFs.

So the purpose of these investments is to put your money to work and grow your assets. Now something that you need to keep in mind with a brokerage account is that you’ll be taxed upon sale of these assets. So what that means is that as you deposit money, grow it and then decide to withdraw it or decide to sell your investment in order to buy something else – a different mutual fund, a different stock, that kind of thing – any growth on the assets that you hold is taxed on either long term or short term capital gains. And so if you’ve held the asset for over a year you’ll get the long term capital gains rate, and if you’ve held it for less than a year you’ll be taxed at the short term capital gains rate.

Now one of the bonuses of a brokerage account is that you can withdraw funds whenever it makes sense to and you’re not penalized, you don’t have to wait until a certain age like you do with a retirement account. So with a retirement account typically if you were to withdraw early, under age 59.5, you’ll get hit with a 10% penalty but with a brokerage account you can buy and sell and withdraw and deposit as you please and as it makes sense to. And that’s today’s DueNorth Insight.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.