Below I will explain why it’s better to use a Roth IRA for investing and not brokerage accounts. Or rather you should always use your Roth IRA up to the contributions you can every year.
The above shows how pay is taxed. When you use your Roth IRA for stock trading it has 2 different advantages
- You are only tax on it once (when you pay tax when you earn the money) you don’t have to pay any tax on it when you withdraw it.
- Any gains you make you will not pay capital gains on. This is a HUGE benefit.
When you use a brokerage account like robinhood etc you are taking funds from your pay which you have already paid taxes on and then you will pay additional capital gains on any profits you make which is anywhere between 20-30%.
Once you have reached your yearly limit for a Roth IRA and you want to continue to invest you will need to add that money into a brokerage account.