Taxes - taxes on taxable brokerage accounts and retirement accounts

How are taxable brokerage accounts and retirement accounts taxed? With taxable brokerage accounts, you invest cash on which you’ve already paid income taxes, such as money from your paycheck. However, you may still owe taxes on future income or growth from these investments. For example, dividend income is taxed in the year you receive it, even if you haven’t sold the investment, while the growth on capital gains is taxed when you sell your investment.

Retirement accounts such as traditional and Roth IRAs, as well as retirement plans like 401(k)s, are geared toward long-term saving and investing, so they receive special tax treatment. With traditional IRAs and 401(k)s, your contributions can be tax deductible in the year they’re made with earnings taxed upon distribution. Contributions to Roth IRAs and Roth 401(k)s are made with after-tax dollars, meaning you’ve already paid income taxes on the money you’re contributing. And you won’t pay taxes on qualified withdrawals of your earnings.