Among the many vexing aspects of retirement savings accounts and other tax-advantaged accounts is the challenge of keeping straight how much you can contribute, what the tax benefits are, and how to maximize your savings for the future. These accounts, such as individual retirement accounts (IRAs), Roth IRAs, 401(k)s, and health savings accounts (HSAs), offer unique tax advantages that can help you grow your wealth over time.
As soon as Amberly Grant started earning more than $15,000 a year, she started maxing out her Roth IRA, 401(k), and HSA. By taking advantage of these tax-advantaged accounts early on, she was able to secure a more comfortable retirement for herself in the future.
An individual retirement account (IRA) is a tax-advantaged investment account that helps you save for retirement. Money can grow tax-free or tax-deferred, depending on the type of IRA you choose. Traditional IRAs offer tax-deferred growth, while Roth IRAs allow for tax-free withdrawals in retirement.
HSAs are tax-advantaged accounts meant for medical expenses that high-deductible health plans don't already cover. By contributing to an HSA, you can save money on a pre-tax basis and use those funds for qualified medical expenses tax-free.
The best short-term investments offer high yields and less risk compared to investing in stocks. Check out our guide and learn which tax-advantaged accounts are best suited for short-term investing to help you reach your financial goals sooner.
With some care, investors can build a tax-efficient portfolio that's diversified, too. By spreading your investments across different asset classes and taking advantage of tax-advantaged accounts, you can minimize your tax burden and maximize your returns over time.
When constructing a portfolio for your Roth IRA—a type of tax-advantaged individual retirement account—you have a variety of investment options to choose from. Consider diversifying your holdings with a mix of stocks, bonds, and other assets to help your money grow tax-free.
Health savings accounts (HSAs) are increasingly being used as a more tax-efficient means of investing. By contributing to an HSA and using those funds for medical expenses, you can save money on taxes and grow your wealth over time.
Stocks and Bonds. The largest part of our portfolio is in our trust taxable account at Vanguard. For tax purposes, all of the information on your investments is important to consider when building a tax-efficient portfolio to maximize your returns in the long run.
