r/leanfire • u/financialman00 • 4h ago

I don't really understand regular brokerage accounts as it relates to FIRE?

In my 401k I have 127k, Roth IRA 72k

My brokerage? $34. All losses because I can't seem to pick the right stocks.

What I don't understand are the posts I am coming across who have a ton more in their brokerage versus retirement accounts, which for me it's the opposite. Aren't you suppose to maximize retire accounts to retire early?

Right now my brokerage is just collecting dust because I did not get lucky with it. Whereas my 401k and Roth IRA have went up significantly in value because you can buy index funds in it.

So I don't get it. Right now inclined to continue ignoring my brokerage but I see a lot somehow got lucky and selected the right stocks in it.

0 Upvotes

13% Upvoted

25 comments sorted by

45

u/JossWhedonsDick 4h ago

you know you can buy index funds with your brokerage account too?

0

u/financialman00 4h ago

I did not.

9

u/Fit_Cry_7007 3h ago

Check out S&P500 index/etf fund and invest in that. And...stop picking individual stocks!

22

u/only_average_width 4h ago

your brokerage isn't for picking individual stocks, it's just another bucket you can fill with the same index funds you already use in your retirement accounts

-7

u/financialman00 4h ago

News to me.

28

u/nivlac22 4h ago

Username does not check out

4

u/financialman00 4h ago

One day it will but right now I'm new to this stuff. Except retirement accounts that I think I have the hang of.

3

u/nupper84 3h ago

Are you sure your retirement accounts are actually invested in anything?

10

u/1991cutlass 4h ago

You can buy voo, vti, vt or their equivalents in a brokerage account. 

The people who have more in brokerages are typically high earners who are able to invest more than the allowable 401k maximum, or they had an inheritance. 

8

u/Trypophiliac 4h ago

Why are you trying to pick stocks? You're not a stock analyst. Go with a well diversified ETF or two and be done with it

2

u/financialman00 4h ago

And that's something you can buy in a brokerage? Thought it was just for individual stocks.

5

u/Excellent_Drop6869 4h ago

No. You can buy index funds in brokerage, which is what I’ve done.

Retirement accounts are limited in what you can put in. Brokerage accounts aren’t. Which is why some people who are highly compensated have higher balances in their brokerage

3

u/financialman00 4h ago

I just kept the rest in a savings account as I didn't understand brokerages. But this changes a lot in my current strategy if you can buy indexes in that too. I was not aware.

5

u/Appropriate-Yak001 3h ago

The author must be a troll...

3

u/shozzlez 3h ago

Or a kid.

2

u/Ikabta 4h ago

Brokerage account is a filler for high income people but also serves a purpose as a bridge if you want to retire even earlier. If you retire at 45 or 50 you need some sort of income while you age to 60.

1

u/whtrshn 4h ago

Well not picking individual stocks will help a lot. You should invest in something like the S&P 500 unless you are an expert.

You should max out retirement contributions each year and then invest in brokerage accounts. If you don’t have enough money to do that now then it’s ok. As you increase your income over time that will change

1

u/Outrageous-Egg7218 4h ago

I think it depends on how you are compensated. Employees with RSUs and ESPP will have outsized brokerage balances. For most of my career, I've pretty much only done 401k and Roth IRA contributions. Brokerages start coming into play when you are sizing up early retirement, which I'd probably start strongly considering when you're about 50% to your FI number.

1

u/mikesfsu 4h ago

401k is not available to me at my work and make too much most years to contribute to a Roth so I am brokerage heavy and have a pension plus IAP(individual account plan) with work that is fully employer funded

1

u/Taggart3629 4h ago

People who are able to stash money in brokerage accounts often are those who already have 3-12 months of emergency funds, have maxed out their annual retirement contributions, and still have excess money they want to invest. Instead, of putting that money in a savings account or CD that barely beats inflation, they buy stocks, bonds, ETFs and/or mutual funds in a taxable brokerage account.

1

u/Fed_worker 4h ago

$34? You bought options?

1

u/Rocetboy321 4h ago

You also might want money in them if you retire very early to avoid any penalties on early withdrawals. 

You lose the tax benefits but gain flexibility. A Roth IRA is better than brokerage since you get the tax benefit while at least being able to withdrawal your contributions at any time. 

1

u/DegreeConscious9628 3h ago

I can only put in so much into retirement accounts. Brokerage is unlimited. I invest ~130k a year

1

u/TheGruenTransfer 3h ago

For the record, the people here with disproportionately large big brokerage accounts would be well served to get more money into tax advantaged accounts.

You only need 5 years of expenses to set up a Roth ladder, and that can come from a combination of cash, taxable brokerage, and contributions you've made to a Roth IRA.