Should a Millennial Invest in Individual Stocks if His 401(k) Isn't Maxed Out?

In this segment of Motley Fool Answers, Alison Southwick and Robert Brokamp, along with Motley Fool Wealth Management's Sean Gates and Joe Perna, consider the appropriate investment vehicles for a 20-something who (well done, John!) is already putting a fair share into his 401(k) and routing some to a brokerage account as well.

The answer rides on one word: flexibility.

A full transcript follows the video.

This podcast was recorded on Sept. 6, 2016.

Alison Southwick: John B. writes: "A friend recently mentioned that it doesn't make sense for people our age, in our late 20s... " Yes, John, that is our age, should anyone ask. I am in my late 20s. "... to be investing in a personal brokerage account if not maxing out a 401(k)." He continues: "I contribute 11% to my 401(k) with an 8% employer match. I also contribute biweekly payments to some index funds in a side brokerage account. Does it make sense to bump up my 401(k) contribution and eliminate my brokerage contributions?" Joe, this one's going to you.

Joe Perna: Yes. I would say [good for] John B. for saving diligently into the 401(k). It's good to get started early, so late 20s I would say, is starting fairly early.

Southwick: Yeah, that's good.

Robert Brokamp: That's pretty good.

Perna: And saving 19% will mean taking into account the employer match. That's pretty hefty. That's a good chunk to be putting toward the retirement plan. When thinking about saving into a 401(k) in the taxable account, I like the idea of having a taxable account due to the flexibility that you have.

That flexibility is huge when you're thinking about down payments for a house. When you're thinking about wedding costs if you're not married yet, or wedding rings, or automobile purchases. All of those things. Cost funds -- you need to be using money. When it's tied up in retirement accounts, you can't access those funds as easily.

So those taxable accounts, I think, are great. To me, the flexibility is fantastic, and I would say 19% is a good amount to be putting toward retirement. Additional flexibility is fantastic. I think there's not a problem there, and I would disagree with your friend. Maybe defriend him on Facebook.

Southwick: Oh, ho, ho.

Perna: Maybe not that far. But I think you're doing a great job, John B.

Southwick: So the next time a friend recently mentions that, then he can say, "No! I enjoy the flexibility that my taxable accounts give me because I plan on getting married and doing all these wonderful things with my life."

Perna: That's right. Stay out of my business.

Southwick: What do you know about me? You don't know me, friend!

Gates: The next time he talks to people, he won't have anyone to go to, because he will have alienated all of his friends.

Southwick: Who were just trying to help. Oh, man.