Register for a free 1 hour beginner crash course!

HOW TO INVEST IN INDEX FUNDS!

Thursday July 8th, 5PM PT

We'll be giving away free copies of our signature investing course!

(427 reviews)
4.9/5
July Webinar How to invest in index funds
Days
Hours
Minutes
Seconds

Is it still worth it to invest in a taxable brokerage account after maxing out my Roth IRA?

Sometimes I hear from people who are so concerned about taxes, they’re missing the bigger point. You want your investments to actually make money!‎

For example, let’s say you can’t contribute any more to a Roth IRA because you’ve maxed out the $6,000/year contribution limit. Is it still worth it to invest in a regular taxable brokerage account? ABSOLUTELY! ‎

Let’s work it out: Invest $10K in a brokerage account at a 10% rate of return. 20 years later it will be worth over $67,000. If that was in a Roth IRA, there would be no tax! You keep all $67K! But if it is in a regular brokerage account, you have to pay tax on the $57,000 of gains you made. Let’s say you pay 25% tax on that. That means you pay $14,250 in tax. Ouch!‎

But here’s the thing. After you pay that $14,250 in tax you’re still left with $52,750. For those keeping track at home, that’s still a LOT MORE than the $10K you started with. So yes I would much rather have $52,750 than $10K. So yes, I still invest, even if I’m taxed on the gains.‎

That’s what “don’t let the tail wag the dog” means. Don’t let the fear of paying some tax prevent you from choosing the right investments first. Once you do that, then take advantage of any tax breaks, like a Roth IRA, 401k, HSA, etc.‎

Speaking of HSAs, I sometimes get asked “Should I choose a high deductible health plan just to get an HSA”. NO! Don’t let the tail wag the dog! Choose the right health plan for your health. Then, if it happens to include the nice HSA tax break, then sure, go for it!‎

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.‎

-Jeremy‎

via Instagram

TAKE THE COURSE!

How to invest course

LET'S CONNECT

ABOUT

Jeremy Circle

Hi, I’m Jeremy! I retired at 36 and currently have a net worth of over $4 million. 

Personal Finance Club is here to give simple, unbiased information on how to win with money and become a multi-millionaire!

MORE BLOG POSTS

Lebron James uses free Pandora with ads

How frugal is LeBron James?

Lebron James has been called the cheapest player in the NBA. He really did say that he doesn’t pay for Pandora without ads (I think it was $3/month at the time) in order to save money. (I think Pandora since

Read more →