Standard brokerage accounts tend to feature a broader range of investment offerings compared to tax-advantaged accounts.
These options include stocks, bonds, mutual funds, ETFs and even advanced instruments like options and futures.
While retirement or educational savings accounts might place limitations on which investments you may select, brokerage accounts tend to not restrict investors to specific asset classes.
Unlike specialized investment accounts, funds may be withdrawn from brokerage accounts at any time without fees or penalties, though you may owe taxes on capital gains.
Contributions to traditional IRAs can be deducted from your taxable income, which could potentially lower your overall tax liability during the contribution year.
Roth IRAs conversely offer 100% tax-free growth and withdrawals on post-tax dollars, meaning you could save on withdrawals in retirement.
Since the investment horizon for and IRA is typically decades out, your investments have the opportunity to maximize compounding interest without being bogged down by annual taxes.
IRAs encourage individuals to keep their money invested with early withdrawal penalties if the funds are used prior to retirement age (typically 59½).
Arguably the biggest benefit, many employers offer a percentage match on contributions employees make to their retirement accounts. This is actually free money given that you contribute at least the match amount.
Employer-sponsored plans, like 401(k) accounts, tend to have significantly higher contribution limits as compared to IRAs. This allows employees to save a greater portion of their income in a tax-advantaged manner.