Maxed Out Your Retirement Accounts? It’s Time to Open Up a Taxable Brokerage Account

Maxed Out Your Retirement Accounts? It’s Time to Open Up a Taxable Brokerage Account

If you are a regular reader of, you know that investing in stocks and bonds is something that you only want to do with your I-don’t-need-to-touch-this-for-at-least-five-years-and-ten-is-even-better money. For most people those hard earned, truly long-term dollars get tucked away in retirement accounts through work (using a 401(k) or 403(b), for example) or on their own (using a traditional or Roth IRA, for example). What happens, however, when you’ve maxed out contribution limits on both of these accounts and you still have money to invest for the long-term? You’re ready to open up a taxable brokerage account! Today we’ll take a look at where to open these accounts.

The Big Three Make It Easy

Just as there are many places where you can buy hammers and nails, you’ll likely find it most convenient to shop at a home improvement superstore if you are doing serious home improvements. These big box retailers have a large selection and low sales prices due to their high sales volumes. The same dynamic exists when shopping for investments. There are many types of financial institutions that will happily “sell you investments.” My personal preference, however, is to use what I call the “big three” of retail investing: Vanguard, Fidelity, and Charles Schwab. I like these institutions because they offer a wide range of my preferred investment vehicles—index funds and target date retirement funds—at very reasonable prices.

Some Like Home Depot, Some Like Lowes

Figuring out which brokerage firm is best for you is a lot like asking what’s better, Home Depot or Lowes. Each of these institutions sells similar merchandise, so it’s best to walk the aisles in order to get a feel. In terms of brokerages, this means going online to the websites of each of these institutions and spending some time poking around to get a sense of where you feel most comfortable. If you are only going to buy index funds and target date retirement funds (no individual stocks) and you are comfortable with an online investing experience, on the margin I prefer Vanguard with its famously low prices. However, if you are going to own individual stocks and/or prefer to work with a financial institution that has a branch network presence, Fidelity and Schwab will likely be a better fit for you. (Note: I don’t recommend that you actively buy individual stocks unless you want to make stock picking your profession. However, sometimes you inherit them or receive stocks as compensation and for tax reasons don’t want to sell them).

Your Local Hardware Store Can Be Fine Too... Just Be Sure To Check The Price Tag

You may be wondering how an Ameritrade, E-Trade, Scotttrade, or your regular bank compares. I’d consider them to be like your local nice hardware store. They can also be fine options - the key is to check the prices. You want to know if there is a minimum required investment amount, what the annual management fee is, and whether or not they charge any additional transaction or account maintenance fees.


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