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 does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.