When most people think about building wealth, they often focus on retirement accounts like 401(k)s or IRAs. While these are essential for long-term financial security, there’s another powerful tool that’s often overlooked: the taxable investment account—also known as a brokerage account or non-qualified account. For simplicity, we’ll refer to it as a taxable account throughout this post.
At Truly Aligned: A Wealth Management Firm, our wealth advisors and managers specialize in helping clients uncover the strategic benefits of taxable accounts and how they can play a key role in a comprehensive wealth management plan.
What is a Taxable Investment Account?
A taxable investment account—also called a brokerage account or non-qualified account—is an investment tool that offers unparalleled flexibility and liquidity. Unlike tax-advantaged retirement accounts such as 401(k)s, Roth IRAs, or Traditional IRAs, these accounts:
- Have no contribution limits
- Allow withdrawals at any time without penalties
- Can be invested in a wide range of assets: stocks, bonds, ETFs, mutual funds, and alternative investments
These accounts are funded with after-tax dollars, meaning you’ve already paid income taxes on the money you invest. While the earnings—interest, dividends, and capital gains—are taxable, this account’s flexibility makes it a key tool for both short-term financial needs and long-term growth.
At Truly Aligned: A Wealth Management Firm, our wealth advisors incorporate taxable accounts into financial plans to meet goals like funding a child’s education, buying a vacation home, preparing for retirement, or supporting philanthropic initiatives.
The Tax Advantages of a Taxable Investment Account
While taxable accounts don’t have the upfront tax breaks of retirement accounts, they offer unique tax efficiencies when managed strategically by a wealth manager.
- Dividends and Interest Income:
- Qualified Dividends: Taxed at lower capital gains tax rates (0%-20%).
- Interest from Bonds: Taxed as ordinary income.
- Municipal Bonds: Generally federal tax-free, and if purchased in your home state, they may also be state tax-free.
- Capital Gains:
- Short-Term Capital Gains: Taxed as Federal ordinary income if the asset was held for less than a year.
- Long-Term Capital Gains: Taxed at favorable capital gains rates (0%-20%) if held for over a year.
Our wealth managers at Truly Aligned help clients design portfolios to maximize long-term growth while minimizing unnecessary tax burdens. For example, investing in growth-oriented stocks can defer taxation until the asset is sold, unlike bonds, where annual interest payments are taxed each year.
This strategic tax management might include practices such as:
- Tax-Loss Harvesting (offsetting gains with losses)
- Investing in tax-efficient funds
- Prioritizing long-term capital gains over short-term gains
When managed well, taxable accounts can be a powerful driver of net worth growth.
Liquidity: Easy Access to Your Funds When You Need Them
One of the standout features of a taxable investment account is liquidity—the ability to access your funds without penalties or restrictions. Unlike retirement accounts, which often penalize early withdrawals, taxable accounts provide:
- Immediate access to funds for emergencies or opportunities
- The ability to fund large purchases (e.g., a second home, a child’s tuition, retirement)
- Flexibility to capitalize on time-sensitive investment opportunities
At Truly Aligned our wealth advisors often recommend taxable accounts as a balance between short-term flexibility and long-term wealth-building goals.
Investment Opportunities in a Taxable Account
Taxable accounts are among the most flexible investment tools available, offering a broad range of asset classes, including:
- Individual stocks for potential high-growth returns
- Bonds and fixed-income securities for stability and income
- Mutual funds and ETFs for diversified exposure across industries
- Alternative investments such as real estate funds or private equity
This range allows our wealth managers at Truly Aligned to design personalized portfolios that align with each client’s risk tolerance, financial goals, and timeline. Whether the focus is long-term growth, income generation, or specific financial milestones, taxable accounts offer the versatility needed to deliver results.
Integrating Taxable Accounts into Your Wealth Management Plan
At Truly Aligned: A Wealth Management Firm, we approach financial planning holistically. Every account—whether it’s a 401(k), an IRA, or a taxable account—has a distinct role within a larger strategy.
Taxable accounts often act as a bridge between short-term needs and long-term growth, offering flexibility where retirement accounts fall short. For example:
- They can be used to fund a child’s education without the restrictions of a 529 Plan.
- They allow for strategic charitable giving.
- They play an important role in estate planning, especially when paired with trusts.
Our wealth advisors collaborate with clients to ensure every account serves its purpose, aligning financial decisions with core values and long-term vision.
Next Steps with Truly Aligned
Building wealth isn’t just about numbers on a spreadsheet—it’s about creating a life that reflects your values, priorities, and vision for the future. At Truly Aligned: A Wealth Management Firm, our wealth advisors are here to guide you every step of the way, helping you make informed decisions that align your financial strategy with your life goals.
Let’s explore how a taxable investment account can become an essential part of your wealth management plan.
Let’s connect and start building your aligned financial future today.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk.
Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
LPL Financial representatives offer access to Trust Services through The Private Trust Company N.A. an affiliate of LPL Financial.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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