Written by Alex Seleznev, MBA, CFP®, CFA | Oct 31, 2023
Checking Account: Your Financial Hub
Create a comfortable floor balance that allows you to handle your everyday expenses with ease and without worry.
High-Yield Savings Account: Maximize Interest Earnings
While high-yield savings accounts provide substantially more attractive interest rates compared to traditional savings accounts, a significant number of people still maintain surplus cash in low-yield options.
Health Savings Account (HSA): Triple Tax Advantage
The HSA provides a triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for eligible medical expenses.
Work Retirement Accounts: 401(k), 403(b), and other
Your employer-provided retirement accounts likely constitute a substantial portion of your retirement savings. Be aware of the potential drawbacks that come with having a significant portion of your overall net worth tied up in these accounts.
Individual Retirement Account (IRA): A Personal Savings Option
IRAs offer comparable benefits to 401(k)s but are not sponsored by employers. Evaluate whether it makes more sense to contribute to a Roth IRA or a Traditional IRA based on your current and anticipated future tax situation.
Roth IRA: Tax-Free Growth and Withdrawals
Roth IRAs provide tax-free growth and withdrawals which makes them one of the best choices for retirement savings.
Brokerage Account: Flexibility for Tax-Efficient Withdrawals
Investments held for over a year benefit from favorable long-term capital gains tax rates. However, dividends, interest, and capital gains are taxed on an annual basis, so opt for tax-efficient investments.