Types of Non-Retirement Investment Accounts

A standard taxable brokerage account is the plainest way to invest. You open one at a brokerage, move money in, and buy investments. There's no contribution limit, no earned-income requirement, and no waiting until 59½ — you can withdraw any amount at any time for any reason.

What you give up is the tax advantage. Dividends and interest are taxable in the year you receive them, and when you sell an investment for more than you paid, you owe capital gains tax on the profit. Hold it longer than a year and it's a long-term gain, taxed at preferential rates; sell within a year and the profit is taxed as ordinary income.

So why use one? Because plenty of goals arrive well before retirement — a house down payment, grad school, a career break, starting a business. Retirement accounts penalize you for using money that early; a brokerage account doesn't. It's also where the money goes once you've contributed the maximum your retirement accounts allow.

One caution: accessible is not the same as safe. A brokerage account holding investments can be down when you need the money, so it isn't a substitute for an emergency fund in cash.