Brokerage account.
In plain English
A brokerage account is the standard taxable investment account opened with a firm like Fidelity, Schwab, Vanguard, or Robinhood. There are no contribution limits and no special tax treatment: you put in money you have already paid taxes on, and you owe tax on dividends, interest, and realized capital gains each year. Brokerage accounts complement (not replace) tax-advantaged accounts like 401(k)s and IRAs.
01Why it matters
Once tax-advantaged accounts are filled to the match and beyond, the brokerage account is where additional savings go. Unlike retirement accounts, there is no penalty for taking money out early. The tradeoff is taxes: every dividend and every sale at a gain is a taxable event in the year it happens.
02The math, step by step
You open a brokerage account at Schwab, fund it with $10,000, and buy a total stock market ETF. A few years later you sell at $13,000. The $3,000 gain is taxable in the year of sale. Held over a year, it qualifies as long-term and is taxed at 0%, 15%, or 20% federal depending on income.
03What this is NOT
Brokerage accounts have no contribution limit and no tax shelter. IRAs and 401(k)s have limits ($7,500 IRA / $24,500 401(k) in 2026) but the growth is sheltered. The right order for most people: 401(k) match, IRA, then brokerage account.