7 Benefits Of Brokerage Accounts (Superhero)

Forget everything you thought you knew about retirement planning. While 401(k)s and IRAs get most of the spotlight, brokerage accounts can be a powerful tool for flexibility, tax savings, and early retirement.

In this episode, you’ll learn the seven key advantages brokerage accounts offer, including how a married couple could generate over $126,000 in tax-free annual income, how heirs can inherit appreciated assets without paying capital gains tax, and how these accounts provide penalty-free access to funds before age 59½.

Ari explains how brokerage accounts can bridge the gap for early retirees, solve the “qualified rich, cash poor” dilemma, and enhance estate planning. You’ll see how combining retirement accounts with brokerage accounts creates tax efficiency and freedom that traditional strategies overlook.

Listen now to learn how brokerage accounts can accelerate your retirement plan and give you the flexibility to enjoy life on your terms.

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Advisory services are offered through Root Financial Partners, LLC, an SEC-registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult an investment, tax or legal professional regarding your specific situation.

The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.

Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements

Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.

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Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.

Episode Transcript

Speaker 1 (00:00):
Brokerage accounts, or, as I like to call them,
superhero accounts, are, in myopinion, the best account if you
want to retire early, and I'mgoing to go through seven
reasons why so that you can seehow they might really change
your retirement in a big way.
Now I have a favorite reasonfor them and then I have a
financial favorite reason, whichyou might think is the same,
but they're different, and I'mgoing to tell you why.

(00:21):
So if you look at my screenhere, this is my important
numbers sheet.
You they're different and I'mgoing to tell you why.
So if you look at my screenhere, this is my important
numbers sheet.
You guys can get all of thisand more in the Early Retirement
Academy.
It tells you everything youneed to know Current tax
brackets, deductions, socialSecurity and if you go down here
to the long-term capital gainstax section, you can see you can
pay 0% taxes if you're married.
Finally, jointly up to $96,700or $48,350 if you're single plus

(00:46):
you get the standard deduction.
So if you're married and yourstandard deduction is the one
you're taking instead ofitemizing at $30,000, and you
want to take advantage of this$96,700 long-term capital gains
tax bracket, you couldtheoretically generate $126,700

(01:08):
and not pay any taxes.
Well, that's amazing.
What's an example of that?
Well, let's just pretend.
Keep it real simple.
You bought Apple stock for$1,000 and it's grown to
$150,000.
That's amazing.
And if you retire at 55,hypothetically you have no other
income coming in.
Now, maybe you do, maybethere's rental income, maybe

(01:29):
there's part-time income, maybethere's inheritance.
But just for example's sake,pretend there's not.
What you can do is you can takeyour $1,000 that you bought
Apple for, and it grew to$150,000.
Well, you have $149,000 gain.
Theoretically, you could sellyour entire Apple position, and
$126,700 you would not pay anytaxes on.

(01:51):
But wait, didn't?
I have big gains, don't?
I have to pay taxes?
Not in this case.
Now depends where you live, soyou need to make sure you're
aware of state taxes as well,but on the federal level.
The amazing thing about this isthe first 126,700, you pay 0%
taxes on, and then anythingbeyond that.
You would then be in the 15%bracket.

(02:12):
So that's the first reason asuperhero account is incredible.
Now, that's my favoritefinancial reason.
The real favorite reason isflexibility.
Imagine you max out your 401kand you have $3 million.
And now you're 52 and you wantto retire.
Well, look, you're gonna haveto pay crazy penalties and taxes
to get access to that money andyou might be over your boss or

(02:36):
commuting or deadlines and justwant to be done.
So there are tons of amazingbenefits to 401ks and Roth IRAs,
but this brokerage, thissuperhero account, is so often
overlooked.
I have a separate episode of howdo you invest in your superhero
account.
You could see over 50,000 ofyou resonated with that episode
because it's how do you actuallyinvest in it?
Today I'm talking about whatare the benefits of it.

(02:59):
So make sure to check out thatepisode if it's of interest.
Let's get into today's episode.
My name is Ari Talbleed.
I'm a certified financialplanner, host of the Early
Retirement Podcast and ChiefGrowth Officer at Root.
I love helping people optimizewhat they've worked so hard for
to retire early, aka spend moretime doing what you want to do.
So first, benefit flexibilityUnlike 401ks, roth IRAs.

(03:23):
Benefit Flexibility Unlike401ks, roth IRAs, 403bs, 457s
all these different numbers thatsomeone made up once so that
they get to feel really smart byhaving a 457b.
The reality is this brokerageaccount.
This is total flexibility.
Now what's the con?
Well, the con is you don't geta benefit when you put money in.
You don't get a tax benefit.
You get a benefit that, if youwant, you can access that money

(03:45):
whenever you want, but you dohave to pay taxes unless you're
using that tax gain.
Harvesting that's the name ofthe strategy.
I went over at the beginning topay $126,000 tax-free and most
people, by the way, they don'tdo that.
Most people there's part-timeincome or social security or
rental income and they're stillworking a little bit.
But what they're able to do isthey're able to maybe pay 0%

(04:06):
taxes on a $20,000 gain in oneyear and then 40,000 the next
year and then 10 the next year.
So you can get strategic withit.
So number one is flexibility.
There's no limit.
You can put as much money in,you can put $10 trillion in and
the government will never sayanything.
So I find most people who reachout to me they are qualified

(04:31):
rich, cash poor.
The majority of their money isin a 401k or IRA and they don't
have enough in that brokerageaccount, which is your best
account way, how it works.
When you withdraw from it, it'sas if you're just making more
money.
It's called ordinary income.
So if you want to spend$100,000 in retirement and it's

(04:57):
all coming from a 401k, you paytaxes, just like you can see on
my screen here.
If you take $100,000, the first10% is applied to the first
$23,000, between $23,000 to$96,000, 12% then beyond that 22
.
And then, of course, statetaxes.
Number two it's a great bridgefor your early retirement.
What if you retire at 57?
Great, and most of your money'sin a 401k and you don't have

(05:20):
access to what's called the ruleof 55 because you retired at 53
.
But most of your money's in a401k.
You can't really take it in.
You can, but you don't want topay the taxes and penalties,
trust me.
So now you need money to act asa bridge until 59 and a half,
when you can start pulling fromyour 401k or IRA, hypothetically
.
So a early retirement accountbridge, like this superhero or

(05:43):
brokerage account or what somepeople call after-tax account,
or some people call it a jointaccount or individual they're
all the same exact thing.
It's just money that youalready were taxed on, that
you're putting in to whateveryou want, so it can grow or not
grow and help as a bridge untilyou can access your qualified
money in your retirementaccounts.
Number three is capital gainscontrol.

(06:05):
I mentioned this already, butthe fact that you can choose
your income is powerful.
If you have a brokerage account, you pay capital gains taxes.
So look at it like this.
Let's go to my screen again.
Pretend you have $100,000 in a401k that you're pulling from.
You're going to pay 10%federally on the first $23,000,
then 12%, then 22%, excludingstandard deduction in this

(06:26):
example.
You pay on this scale here, so10, 12, 22.
So some dollars are taxed at22%.
If you're taking $100,000 froma long-term capital gains tax
meaning you put money in you'veheld it for at least a year in
that position.
You bought Apple stock for$1,000, it's now worth $101,000

(06:49):
and you held that for over ayear.
The first $100, you could see96,700 is at 0% and then you go
to 15%.
Then, if you make over 600,000,you're at 20%.
20 is still less than 22.
And I'm a CFP, so you guys justsaw that math right there.
So you can see capital gainscontrol is powerful.
Number four is tax lossharvesting opportunities In a

(07:11):
401k.
You can't even do tax lossharvesting, so I'll have people
reach out and go I'm gonna dosome tax loss harvesting.
My neighbor does, it sounds socool and all they have is an IRA
.
I go you could do it, but you'dbe spending a lot of time and
it would do nothing.
And they're like well, I sawyou could like do a lot and you
can even carry over $3,000, evenif I harvest more losses.

(07:31):
So if I bought Apple stock for$1,000 and then it went to
$10,000 and then it went to$7,000, technically that's a
loss I'd say, well, no, it'sstill a gain.
But if we were to take anotherexample $10,000, apple stock you
bought it.
It's now worth $7,000.
That is a $3,000 loss.
You can't actually harvest thatloss in a 401k.
You can in a brokerage account.

(07:52):
So you can use those losses tooffset other gains, such as a
capital gain, such as sellingyour home or condo or stock or
many different things.
So that's the fourth reason.
Number five is diversification.
Your 401k, I'm going to guess,probably has 10 or 15 options
that you can choose from, unlessyou want to go into brokerage

(08:13):
link and customize it and getsuper fancy, which is a huge
hassle.
So the cool thing about abrokerage account is you can
invest in whatever you want,literally the entire investable
universe ETFs, mutual fundstocks, whatever you want you
can go do and you don't have togo through your 401k at Fidelity
or Vanguard to do so, go do,and you don't have to go through
your 401k at Fidelity orVanguard to do so.
So an important point on thatif all your money is in a target

(08:37):
date fund because you want toretire in 2040, the reality is
it might not be diversifiedproperly, because you know the
401k has 15 options.
Maybe their equity fund's great, but their fixed income or bond
fund isn't great.
You're still going to hold itbecause it's the only one you
want.
You don't want all equities.
If you're thinking, maybeyou're going to retire soon,
most likely.
So because of that, a brokerageaccount is an amazing vehicle.

(08:59):
Maybe and I've seen this happensuccessfully many times what you
would want to do is actuallyput all your money that's in a
brokerage account in a bond fund, because you could choose the
bond fund you want.
It could be exactly what youwant and then you could have all
equities in your 401k.
So you're like well, why wouldI do all equities?

(09:20):
Well, what most people do isthey have their 401k be 80, 20
and their brokerage account be80, 20, but that's not actually
the best way to execute what'scalled asset location, not
allocation location, and in your401k.
You might go well.
The bond fund really sucks.
Here.
I love the equity fund.
I'm going to be 100% equities.
So if I'm in a neighbor orfriend, look at my 401k, they
think I'm crazy.
But what they don't know isactually have a brokerage

(09:41):
account that's investedextremely conservatively and
they're offsetting each otherfor an overall 80-20.
You're really making the mostof all your different assets.
Number six is liquidity.
If you're going to retire,you're going to want to travel.
Most of you want to travel.
So what you like to do is havea certain amount of money set
aside for that traveling.
So I'll encourage people ifyou're going to retire in the

(10:02):
next five years, set up abrokerage account.
You might want to invest it.
So it's growing, not like crazygrowth, not like a Roth IRA,
but growing in a way that themoney is still going to be there
for you.
It might fluctuate a little bit, but it's not going to mean if
markets go down, you can'ttravel and it's not going to
mean you're going to have $10trillion more because it's going
to do so well and you hit theone big winner.

(10:24):
So a brokerage account is totalflexibility If you put $100,000
in there for two years of travel, just as an example.
Don't get mad at me.
Some of you are like how onearth could you spend $100,000
in two years?
Look, I have clients who dothat in six months and I have
clients that would put $100,000over 10 years.
So no right or wrong, but letme know in the comments what you
like to travel with inretirement, how much you need.

(10:45):
And, as you can see for me,even explaining this, I get so
emotional about it because Iwant you to travel and enjoy
your retirement.
If you are putting that$100,000 in, maybe it grows to
$110,000.
Maybe it goes down as far as$90,000, but that might be a
trade-off you're comfortablewith and you don't have to pay
taxes since the money's alreadybeen taxed.
And then number seven estateplanning flexibility.

(11:07):
When you have a brokerageaccount, you receive what's
called a step up in basis, notyou, but your child or neighbor
or heir.
So if you put a hundredthousand Apple stock and it
grows to 10 million when youpass away hopefully not for a
very long time your childrendon't pay any taxes.
They can inherit that and it'sas if they bought it for 10
million or 10 trillion orwhatever I said.
So that's what's really cool.

(11:29):
It doesn't work that way with a401k or an IRA.
If they inherit that there's aschedule, it gets complicated.
I've done many videos on it, buta brokerage account is awesome
for this reason.
So hopefully this video andpodcast depending on wherever
you're listening to this washelpful.
I know sometimes when I'mrecording these episodes and
they're podcasts and I say lookat my screen.
Right here, you're like well, Ican't see your screen.

(11:50):
I'm driving, so don't get in anaccident, don't try to look and
go to YouTube and find theexact timing.
I try to make them so that, nomatter where you're tuning in
from on YouTube or listeningthat you can understand, because
I'm explaining it and I lovehelping you all.
So thank you for digesting thiscontent, however you do,
whether it be through thepodcast or YouTube, I love this

(12:12):
stuff.
If you want to work with Rootbecause you're like wow, I can
tell you guys love brokerageaccounts way more than I do.
This is, of course, what wespecialize in Tax planning,
estate planning, withdrawalstrategy, healthcare, all that
good stuff Go to our website,rootfinancialcom and hopefully
we can help See you guys nexttime.
Thank you all, as always, forlistening to the Early
Retirement Podcast.
I love getting to host theseshows and make different content

(12:34):
for you guys every single week.
I've not missed a single weekin years and that is because I
love getting to do this.
Now, please be smart about this.
Before you actually execute anystrategy that you see me talk
about or hear me talk about,should I say Please talk to your
financial advisor, your taxpreparer, your estate attorney.
Please be smart about this.
None of this should beconstrued as financial advice.

(12:57):
This is for fun, educational,informational purposes only.
Once again, just quickdisclaimer here.
Guys, please be smart aboutthis.
Appreciate you listening, asalways, and you can, of course,
submit a question on my website,earlyretirementpodcastcom, if
you, of course, want me toaddress a specific case study or
topic.
I will not promise I can get toit, but I respond to every

(13:23):
single person and if I find itwill be helpful for a lot of
people, I will absolutely makean episode on it, at the very
least give you some insight.
That's it.
Thanks, guys.