Question by Ty C: What are the different reasons to open a general investing and/or a retirement investing account?
On Vanguard it has a “General Investing” account and a “Retirement Investment” account. Obviously the latter is for IRAs, but what is the advantages and purpose of the general investing?
Best answer:
Answer by Steve
The main reasons are tax considerations.
In a retirement account, depending on how you set up the account, either the contributions can be tax deductible (traditional IRA) or the withdrawals are tax free (Roth IRA).
In a general investment account, depending on how long you hold on to the account, the earnings are either taxed as ordinary income (short-term) or taxed at the lower capital gains tax rate (long-term).
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