Investing Online For Dummies, 8th Edition

Chapter 3

Choosing the Best Account Type for You

In This Chapter

Understanding how different brokerage accounts are taxed

Distinguishing between taxable accounts and tax-deferred accounts

Knowing the different ways brokers can assign ownership to accounts

Understanding the advantages and disadvantages of 401(k)s and IRAs

Finding out about ways to cut the tax bite when saving for college

Online investors tend to be do-it-yourself types, so it’s unlikely that they’ll have tax consultants on retainer just waiting to handle any tax issues they might have. No, many online investors are big on going it alone, which can be rewarding as long as such investors become tax savvy, especially when it comes to how taxes on the different accounts vary.

In this chapter, I explain how investments are taxed and discuss ways in which picking the right kind of account can cut your tax bill. You’ll want to understand the differences between the three main types of accounts — taxable, retirement, and education ...