Brokerage account

A brokerage account is a taxable investment account opened at a broker-dealer, holding securities — stocks, bonds, funds, ETFs — on your behalf. Unlike a 401(k) or IRA, there are no contribution limits, no age restrictions on deposits or withdrawals, and no wrapping tax shelter around what happens inside.

The tax mechanics show up year to year. Dividends and interest are generally taxable in the year received. Selling a position for more than its cost basis produces a realized gain; short-term gains (held one year or less) are taxed as ordinary income, long-term gains at typically lower rates. Realized losses can offset realized gains and, within limits, some ordinary income.

Brokerage accounts are what people typically use for money past the retirement-account limits, or for goals with a shorter horizon than retirement. They are more flexible than tax-advantaged accounts and more tax-exposed. Custody is at the broker, protected by SIPC insurance against broker failure — a different protection from FDIC insurance on bank deposits.