Taxable accounts have a few notable benefits. A big one is flexibility: Though you do have to pay taxes on investment gains, unlike tax-deferred accounts such as IRAs or 401(k)s, you can withdraw the money--contributions and earnings alike--whenever you need it, free of penalty.
Another plus is that there are no limits to how much you can invest in a taxable account (and you don't need to have earned income to contribute). Traditional IRAs have an annual contribution limit of $5,500 ($6,500 for those 50 and older); the limit is $18,000 (increasing to $18,500 in 2018) for employees who participate in 401(k), 403(b), and most 457 plans.
Karen Wallace, CFP® does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.