Kevin Lum: Do You Need a Brokerage Account If You Already Have Retirement Accounts?
Do you need brokerage accounts if you already have retirement accounts? It's one of the most common questions certified financial planning professional Kevin Lum gets asked — and the answer (surprise, surprise) isn't as simple as most people expect.
In a YouTube video, Lum broke down exactly when a taxable brokerage account makes sense alongside retirement accounts, when it doesn't and why it's one of the most underutilized tools for people still in the accumulation phase. Find out more below.
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When a Brokerage Account Probably Isn't the Move
Lum's first point is the one most people don't want to hear. If you're in your 60s, your money is already sitting in tax-deferred accounts and you're not actively saving surplus cash, opening a brokerage account just because you heard it has tax advantages isn't going to help you.
"Opening one just for the sake of having one might not be your highest value right now," he said.
Moving money from a tax-deferred account into a taxable brokerage account in that situation is essentially rearranging dollars while adding complexity to your financial life. In retirement, Lum said, complexity has a real cost, particularly as you age.
His recommendation for retirees with extra cash coming in who aren't going to spend it: A Roth conversion is almost always a better move than opening a brokerage account at that stage.
When It Absolutely Makes Sense
The picture changes if you have surplus income, you're still building wealth or you're staring down a large required minimum distribution (RMD).
Lum described the RMD problem as something he sees constantly. When most or all of a person's wealth sits in traditional tax-deferred accounts, the IRS eventually forces withdrawals whether you need the money or not. Those forced withdrawals stack on top of Social Security and other income, pushing some retirees into the highest tax bracket of their lives; something Lum said he hears from clients regularly.
A taxable brokerage account functions as what he called a pressure valve. It gives you a source of funds that doesn't spike your ordinary income the way an IRA withdrawal does, which creates room to do Roth conversions more efficiently. Rather than paying conversion taxes out of the converted amount (which shrinks what actually lands in the Roth), you can use brokerage funds to cover the tax bill and let the full conversion amount move over.
The Legacy Planning Angle
For anyone who cares about what they leave behind, Lum said taxable brokerage accounts offer an advantage that traditional retirement accounts simply can't match: the stepped-up basis.
When heirs inherit assets from a taxable brokerage account, the cost basis resets to the current market value at the time of inheritance. If you bought a stock at $10 a share and it's worth $1,000 when you pass, your heirs inherit it at $1,000. They could sell it the next day with no capital gains tax owed. Compare that to inheriting a traditional IRA, where distributions are taxed as ordinary income and heirs are required to drain the account within ten years.
Lum's ranking of accounts by inheritance value: Roth first, taxable brokerage second, traditional retirement accounts last.
The Tax Numbers Worth Knowing
For people still building wealth, the long-term capital gains advantages of a brokerage account are major. In 2026, a single filer under age 65 can take out up to $65,000 in long-term capital gains completely tax-free, assuming no other income. A single filer ages 65 and older can pull out $73,600 tax-free. A married couple filing jointly, both ages 65 and older, can withdraw up to $146,000 in long-term capital gains at the 0% rate.
Lum noted an important nuance: Capital gains rates stack on top of ordinary income rather than sitting in their own lane. If other income fills the lower brackets first, capital gains may land in the 15% bracket rather than at 0% — something people often miss when running the numbers.
The Flexibility Nobody Talks About
Beyond the tax math, Lum has some more psychological thoughts. Taxable brokerage accounts have no contribution limits, no age restrictions, no rules about when you can access the money and no penalties for early withdrawal. That freedom has a psychological value that retirement accounts (with their five-year rules, penalty periods and forced distributions) don't offer.
"Money is a tool," Lum said. "If the plan works on paper but you're too anxious to actually spend the money, then the plan isn't doing the job."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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