As you know (if you’ve been reading this column), your money should be growing for you as much as possible, as soon as it comes into your hot little hands. This way you can be financially independent early in life and do all the lovely things you dream of.
At the end of the day, the whole shebang is about taxes. If taxes weren’t a thing, you would just pick an account, save as much as you can and call it good. But, alas, Congress … So how do you maximize your money with regards to taxes? Different accounts have different advantages. Here are the basic five everyone (ish) should have.
1. Roth IRA. In 1997, less than 30 years ago, senators William Roth and Bob Packwood came up with the idea for a new retirement account. They called it the “IRA Plus.” Up to that point, IRAs were tax-deferred, meaning the money that went in wasn’t taxed. This was in exchange for that money being taxed later, upon withdrawal at retirement age. Well, if you were a person who retired with lots of money and a pension, you’d be in a high tax bracket and owe lots of taxes on your IRA money at withdrawal time. So the Roth is amazing because you can pay taxes now, be done with it, and never look back.
2. Traditional IRA, 401k, 403b, etc. These are all tax-deferred accounts. You might wonder why you’d ever use a traditional account when you could Roth all day long. Well, with investing, diversification is the name of the game so let’s put some of your money in tax-free growth (Roth) and some in tax-deferred growth (traditional retirement accounts). If you are a high earner now and have reason to believe you’ll be in a lower tax bracket when you retire, you want to pay less taxes later.
3. HSA.I can’t toot this horn enough. Take the best of both worlds above and don’t pay any taxes. When you’re enrolled in a qualified high-deductible health insurance plan (Google it for your state), you can put money into this account tax-free. It goes in without taxes, grows without taxes, and is withdrawn without taxes. The only catch is it must be used for qualified health expenses. Of course you will have health expenses, so go ahead and max this one out every year ($4,400 for individuals in 2026, $8,750 for families in 2026). Don’t forget to invest it.
4. Brokerage. A brokerage account is just an investment account. These accounts, as are all of the above, are invested with the goal of growing. The difference between a brokerage and all of the above is that a brokerage can be used for anything, while other accounts must be used for qualified expenses. IRAs must be used for retirement at a certain age (with some exceptions) and HSAs must be used for health expenses. Brokerage accounts are available at any time for any reason. As such, they have slightly higher, but still favored, tax implications. If you invest in Apple and it gains $100,000 in two years and you decide to sell, you have to pay taxes on that income. But you don’t pay ordinary income taxes, you pay capital gains taxes, which use a different bracket system and are often lower than income taxes.
5. HYSA. Your high yield savings account is for emergencies and short-term goals. Find a high yield savings account that offers a “bucket” approach and an interest rate of at least 3.5%. Put a chunk of money in one bucket for your emergency account and more chunks of money for upcoming goals like travel, a new car, or braces for your favorite tween.
And, while not an account, another handy tax trick is to stop withholding more than you need to from your paycheck. Many folks like that little bump they get from the IRS when they’re owed money. But you can look at it like this: All year you’ve been giving the IRS a no-interest loan and then they pay you back after tax season. This is silly. You could be investing that money all year long and enjoying the delights of compounding interest.
In the end, you’ll want to check in with your tax professional to help you mitigate your tax burden, but these accounts will help tremendously on your road to wealth.
Make all the money, save all the money, live all the life.
Megan Janssen is the founder of Money Juice (www.money-juice.com) and a financial advisor with Forum Financial Management, LP. The ideas and language written here are those of the author and do not necessarily reflect the views or opinions of Forum.