When it comes to planning for retirement, Roth IRAs have gained widespread attention for their tax-advantaged status and the promise of tax-free withdrawals in retirement. Financial experts, YouTubers, and podcasters have been touting the benefits of contributing to or converting assets into Roth accounts for years. But an often-overlooked vehicle could empower you to manage your investments just as efficiently: the humble taxable brokerage account. Surprisingly, with the right strategy, you can even pay 0% capital gains tax, mirroring one of the biggest appeals of a Roth.

• 00:00 Overlooked benefits of after-tax brokerage accounts
• 02:29 Limitations of the Roth IRA
• 06:20 Tax implications of brokerage accounts
• 07:57 Tax benefits of growth stocks
• 13:14 Understanding Tax Brackets and Deductions
• 16:53 Inheritance rules for IRAs vs. brokerage accounts
• 17:44 Managing taxable brokerage accounts

A taxable brokerage account lets you invest in virtually anything: stocks, mutual funds, bonds, ETFs, and more. These accounts, however, are often dismissed when compared to their tax-advantaged counterparts because:

• Annual Taxation: Every year, you pay tax on dividends, interest, and any realized gains.

• Ordinary Income Tax on Short-Term Gains and Interest: Holdings sold within one year and earned interest are taxed at your regular income rate.

• Potential for Long-Term Capital Gains Tax: Sales after more than one year are taxed at the long-term capital gains rate, which is typically lower.

When used strategically, they offer flexibility and powerful tax advantages.

The key to unlocking Roth-like benefits is understanding how and when taxes apply—and how to minimize them. Invest strategically and focus on growth over dividends. Choose investments that don't pay dividends, such as growth stocks or low-dividend index funds. No dividends mean no annual income to be taxed because gains are only taxed when you sell.

You can also use Index Funds and ETFs, which usually distribute minimal dividends and capital gains, keeping annual taxes low. Avoid open-end mutual funds in taxable accounts, as they tend to generate capital gains every year, eroding long-term growth with recurring taxes.

If your total taxable income (after deductions) stays within the 12% tax bracket—a figure that for 2026 is $50,400 for singles and $108,800 for married couples file jointly—you can sell appreciated assets and owe 0% in federal capital gains tax. It's wise to time withdrawals, plan major sales during years with little other income—such as early retirement or a gap year—to fall within the 0% bracket. Keep an eye on your other sources of income: IRA withdrawals, Social Security, and pensions count toward taxable income, potentially bumping gains into the taxable range.

Taxable accounts also offer:

• Ability to Borrow: Take loans against your investments without triggering taxable events
• Step-Up in Cost Basis: Heirs inherit assets at their market value on your death, often eliminating capital gains on past appreciation—a feature that Roths don't fully replicate.

By understanding how to structure and manage your taxable brokerage account, you can access strategic flexibility—not just in managing withdrawals, but in transferring wealth to future generations. The "secret" is simply knowing and applying the rules, with tax-aware investing and withdrawal strategies smoothing the way for potentially tax-free wealth growth and transfer.

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Variable annuities are often promoted as a secure way to generate guaranteed income during retirement, drawing the attention of retirees seeking stability for their nest eggs. But beneath the surface, these products frequently come with complications and costs that can erode your savings and limit your financial flexibility. In this episode, I share the details of the often-overlooked downsides of variable annuities and give you some important insights every investor should consider.

• [03:14] What is a Variable Annuity?
• [04:27] Understanding Annuity Benefits and Growth
• [08:41] Lack of fee transparency in annuities
• [09:45] Variable annuity investment drawbacks
• [14:59] Avoiding variable annuity pitfalls

A variable annuity is an investment product sold by insurance companies, offering a selection of investment accounts, referred to as sub-accounts, designed to mimic mutual fund performance. The tax-deferred growth inside the annuity is often touted as a major benefit. This tax deferral is redundant for retirement investors who already enjoy similar benefits in IRAs or 401(k)s.

Many variable annuities advertise living benefits, such as guaranteed lifetime withdrawals. For instance, a $100,000 investment could guarantee $5,000 per year for life, regardless of the contract's cash value. Some contracts offer guaranteed "growth" of your future income base, but crucially, this is not money you can cash out: it simply determines your withdrawal amount, not your walk-away value. The catch is that these appealing features come at a steep price.

One of the most significant drawbacks of variable annuities is their high-cost structure. These costs can be organized into three main categories:

• Mortality and Expense (M&E) Charges: Annual administrative fees imposed by the insurance company, typically ranging from 1% to 2% per year.

• Sub-Account Fees: Investment management fees that vary depending on your chosen investments. While some options are slightly less expensive, others can reach up to 2% annually.

• Rider Fees: If your contract includes a guaranteed income benefit, expect an additional 1%-2% per year for this privilege.

Combined, these expenses can easily total 3% to 4% annually, making variable annuities arguably the most expensive retirement investment around.

Transparency is another major shortfall in the world of variable annuities. Many investors are not fully aware of the high fees they're paying. While the fees are listed in the prospectus, many advisors fail to highlight them, and statements often obscure these charges. Understanding true costs requires diligent reading of the fine print, and even then, variations in sub-account performance can lead to unexpected results. You may believe you're mirroring mutual fund returns, but annuity sub-accounts are not identical and can significantly underperform.

The promise of guaranteed income comes at a heavy cost. For the insurance company's guarantee to pay off, you'd generally need to either live well beyond average life expectancy or experience long-term poor market performance. Since withdrawal rates are limited and fees are high, over the long run, variable annuities may yield less retirement income or reduce the amount left to your heirs.

Variable annuities can be marketed to highlight only the positives, but it's important to consider the high fees, lack of transparency, poor risk-return tradeoff, inflexibility, and opportunity costs involved. Before committing your retirement savings, do your homework—or consult a truly fiduciary advisor—and make sure variable annuities are the best fit for your long-term goals.

• Retirement Readiness Review
• Subscribe to the Retire with Ryan YouTube Channel
• Download my entire book for FREE

• www.MorrisseyWealthManagement.com/contact

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