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A
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B
I'm 25 years old. I'm living at home. I make around $56,000 a year and cash flow in college. So recently I started investing in a brokerage account and I was wondering, is it wrong to primarily invest into a brokerage account?
C
Just in general?
A
For what purpose? I don't understand your. Why would you only do that?
B
Yeah, so recently I was thinking more about it. I should put money into the retirement accounts, of course. But I was kind of wondering, is it wrong to put more money into the brokerage account versus retirement accounts for the purpose of saving for like a down payment on a house or being able to use that money before the age of 59?
A
Yeah. Well, the first thing we would tell you to do is be debt free. Are you?
B
I am.
A
Good. And then we would tell you to have an emergency fund of three to six months of expenses. Do you?
B
I do.
A
Great. You're way ahead of the game. You're 25 and you're in college. What are you studying, sir?
B
Business administration.
A
Cool. And when will you graduate?
B
This fall, but I'm thinking about going for a master's degree.
A
Why?
B
I haven't been able to find an opportunity in the field I'd like to pursue.
A
What field is that?
B
Merchandising.
A
You don't need a master's degree.
B
Okay.
A
No, that's not what's keeping you holding you back. Are you working full time now?
B
I am.
A
What do you make now?
B
56,000.
A
Oh, you told me that. I'm sorry. You told me that. All right, so 25 years old, you're making 56,000.
C
What are you doing now, Connor, for a job?
B
I'm a deli manager at a grocery market.
A
Great. Okay, well, I would start pursuing your merchandising career now while you finish up your. Are you finishing a four year degree or a two year?
B
Four year.
A
Okay, good for you. Okay, excellent. Yeah, you got some pretty good basic business tools in your belt. Academically, all you would need for merchandising for sure. And what you need to do though is get in with a good company that lets you mentor and be apprenticed by some fabulous people that have been in the business a while and you can kind of walk alongside them and learn from them, be. Be discipled or mentored, so to speak. That's what I'd be looking for. And I'd be looking for that hardcore and just working it like crazy. I'm going to send you a copy of Ken Coleman's book the Proximity Principle, which will outline a good way to land that kind of position, which is where that's what I would focus on. Now having said all that, back to your question. You're debt free, you have an emergency fund way to go when you've settled in on your permanent career, maybe by this time next year, we would say that you are at Baby Step 3B. And people do two things at Baby Step 3B.
D
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A
People do two things at Baby Step 3B. That 3B is before they start putting 15% away for retirement, they sometimes take up gap period of time and pile up money for a down payment. And you could use a brokerage account to do that. Okay, okay. Sometimes they put zero in retirement, sometimes they put a little in retirement, sometimes they put the whole 15% or baby step four in retirement while they're working on their down payment. If you've got the margin to do both, save a good strong down payment and start putting your 15% away at your new big time job that you've landed by next spring and you're loading up that Roth 401k, I would love that for you. But if you want to take a couple of years and do no retirement and just stack cash for your down payment, that's fine. And then though, you do need to get the Roth long term working in your benefit because from age, let's say from age 25 to age 65, the amount of money that is in the account, that is growth, is about 90% of the money. So let's say you had $2 million in there, then somewhere around a million 8 of the $2 million is growth. That means it's all taxable. You're gonna pay taxes on $1.8 million. If you've got it in a brokerage account. If you've got it in a Roth 401K, zero taxes on that 1.8. And taxes on 1.8 sounds an awful lot like 6 or $700,000. So long term you don't want to only have a brokerage account. Long term you also want to have the tax savings of a Roth 401K Roth IRA.
C
And the question you're asking is fair to say, hey, do I want money tied up till I'm 59 and a half?
A
Yes, some of it.
C
And so that's it. So I would front load your retirement, take care of the Roth IRA, take care of the 401k, and then anything beyond that that you want to be able to save in a brokerage account, you know, get some index funds, whatever that is for you, that's great, then you can take it. But I would do that. Second, to all the retirement, go ahead and get all that funding.
A
Third, behind buying a house.
C
That's right, that's right, exactly.
A
So yeah, sometimes Connor, we get the question like a, a 40 year old one is worried about, okay, I might want to retire in 10 years at 50 and I can't get to anything till I'm 59 and a half. And in that case, you do what Rachel's talking about. Third step, what we call bridge investing. And you'd have some, a brokerage account, you know, S&P 500 account, whatever you want to put it in. And you build some wealth there that you can use for those in between years until you get to the Roth tax free. But don't avoid the tax free growth. That's a million dollar mistake, minimum. For someone your age, that would be a huge mistake. So long term it has to be part of your decision making, but it doesn't have to be the whole thing. And today if I'm you, I'm, I'm landing that big job and I'm gonna stack cash for at least 18 months, maybe two years and get me a nice house. And then you can start loading 15% in and get the house paid off. Work the baby steps. And I think you're gonna be in great shape if you just do those things. Create your free every dollar budget today, the simplest way to budget for your life.
Date: June 22, 2026
Host: Ramsey Network Team
Featured Experts: Dave Ramsey, Rachel Cruze
Caller: Connor
In this highlight episode, the experts on The Ramsey Show respond to a young caller named Connor, who is seeking investment advice as he begins his financial journey. At 25, Connor is debt-free, has an emergency fund, and is weighing whether it’s wiser to invest aggressively in a taxable brokerage account or focus more on retirement accounts, especially as he saves for a future home. The episode centers on the critical mistakes young investors make by not leveraging tax-advantaged retirement accounts and offers prescriptive steps to maximize wealth-building.
Connor's situation:
Dave's Clarification:
Mentorship Is Key:
Book Recommendation:
Short-Term Goals vs. Long-Term Wealth:
Tax-Advantaged Retirement: The Million Dollar Lesson
Deciding the Balance:
Bridge Investing:
Final Practical Advice:
On Academic Credentials:
On Compounding and Taxes:
On Prioritizing Investments:
The Million Dollar Mistake:
This episode is a focused, actionable primer on how to avoid costly investment mistakes and prioritize financial decisions in your 20s, all delivered in the measured, authoritative style signature to the Ramsey Network.