[Music] Um, so let's talk about first why we still think that retirement accounts matter because you said something so interesting Brian. You said, All right, uh, some people say don't do retirement accounts if you're going to retire early. Just do taxable brokerage. Forgo your 401ks, forgo your IRAs, for all that. Their language is even harder, Your 401k stinks. Yeah, I think that is asinine. There's two real reasons why we would say that. The first is odds are even if you retire early, you're still going to need money post 59 and a half. Yeah, you might need something to bridge you from 50 to 60 or from 35 to 60 if you're retiring super early, but there's a good chance you're also going to need dollars post 59 and a half. So why not optimize? Why not take advantage of tax opportunities that exist to you today so that those dollars can continue to grow tax-er? I think a lot of people, they think when they do tax analysis, they assume that

everything is static and it STS, but we're not. It's just not the reality of the world. It's because tax rates change over the years. Also, your tax rates are going to change because while you're in your Peak earning years, you're probably paying higher rates. When you retire, you're hoping that there's some type of gamesmanship or ability to play the system to lower your tax rate and create a better opportunity for yourself. And one thing you may not even recognize is that there are ways to get early access to your retirement accounts while still getting the tax advantages so you can literally have your cake and eat it too. And we're going to talk about some of those in retirement accounts. But I think it's worth mentioning before we dive in there. Let's talk a little bit about taxable brokerage accounts. Let's talk a little about after-tax accounts. This is the typical Bridge account. If you think that you're going to leave the workforce before 55 before 59 A5, you need to be thinking about is this a

viable tool for me. By the way, before we even start on this, I think that's two key dates that everyone should write down right now. If you think you're leaving the workforce early, you need to know what's the age you turn 55, what's the age you turn 59 and a half. The age that you turned 55 is 55. How far are you from these key dates? Good point. It's a good point, but how far are you from that? Because this is going to help you back into the answers. And probably a good place to start is these taxable brokerage accounts. Yeah, and we see people use these all the time because while there aren't benefits on the front end of taxable brokerage accounts, one of the benefits that exist is that as these dollars grow and as you transact inside of these, they're actually subject to favorable tax rates, not ordinary income rates like what your pre-tax or IRA accounts are subject to, but they are subject to capital gains rates, which generally and historically have been lower than marginal tax rates.

yeah as you can see your earned income your traditional retirement contributions are all subject to your highest ordinary income tax rates. Uh, we much prefer paying lower capital gains rates, lower dividend tax rates. That's why there are some benefits definitely to using these taxable brokerage accounts to be your bridge. And when we think through our clients that have entered into early retirement, that are part of the fire movement, part of the fine movement, most of them have access to taxable accounts and using that after-tax account is part of their strategy. But what's really interesting is for our folks, it's not an all or nothing, it's not 100 one way and zero the other way or vice versa, and we want to kind of chat through that. So let's talk about some of the pros and cons to taxable brokerage accounts. The first pro is that anyone can open one up. Like if you are above the age of 18, you can open up an after-tax brokerage account and you can begin funding it. There's no income limits, there's no exclusivity limits.

don't have to have earned income. You can open up an account and begin funding. So it is super super accessible, super available to everyone. Yeah. It has no contribution limits. It makes it so much easier because it does allow you to, if you have margin, if you live a disciplined life and you live on less than you make and you have the margin, you can open up a taxable brokerage account. Yep. And there's no withdrawal restrictions. You don't have to wait until age 59 and a half. You don't have to pull out only a certain amount or pull out a minimum amount each year. So it really is the most flexible type of account. We already mentioned it's subject to long-term capital gains that are at favorable tax rates. Now you have to make sure that you hold these individual investments or securities at least for a year. So it's subject to long long-term capital gains, but that's a lower tax rate than you pay otherwise. But taxable brokerage accounts are not all rainbows and butterflies. There are some downsides.

to them, yeah. I mean current year income, whatever these taxable brokerage accounts make, whether it's interest, whether it's dividends, whether it's capital gains, you are going to pay income taxes in the year that you earn money. That is not necessarily the most favored way when you can think about the fact that there's Roth assets that grow completely tax-free, tax-deferred assets that they make the deal that yes, you don't pay any income tax now, but when you pull it out, you will pay taxes at ordinary income tax rates later. So you just need to know what your tax rates are. But in when we're talking about taxable brokerage accounts, they do require you to pay those taxes in the current year. That's definitely a con.

Why Retirement Accounts Still Matter for People Retiring Early

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