April 18, 2022

We’ve talked before about the difference between Roth and Traditional retirement accounts. The problem with these accounts is that withdrawals before you’re 59 1/2 years old, you’ll pay a tax penalty, and so you can’t retire early on these accounts. That’s where a Taxable Brokerage Account comes in.

A Taxable Brokerage Account isn’t technically a retirement account. There’s no tax benefit on the front end or on the back end. However, you’re not limited on how much money you can add to this year, and you’re not limited on when you can start withdrawing.

So if you want to retire early, and you don’t want to invest in real estate, run your own business, or anything like that, a taxable brokerage account may be the way to go. You’ll invest money in that account for as long as you’re working, and then once you feel you’ve got enough to retire, you’re free to do that! If you’re married, and you have a taxable brokerage account, you can withdraw up to $106,700 of long-term capital gains TAX FREE. On top of that, you can always withdraw contributions tax-free. So you can stack this account up as much as you like, and live off of up to $200,000 per year until you reach 59 1/2 and can access your retirement accounts penalty free.

As I said before, this is perfect for someone who wants to retire early without investing in businesses or real estate. If you want to work a W-2, hold down the fort, and spend time with your family, this strategy could be your roadmap to wealth.

**As always, be sure to talk to your CPA or financial advisor before making any moves. My advice isn’t a one-size-fits-all solution, so make sure you find a strategy that fits your specific financial situation.