Which Investment Account Is Right for You?

Where you invest matters as much as what you invest in. The right account structure can save (or cost) you thousands in taxes.

The Three Account Types

When to Use Each

Traditional 401k / IRA

• You're in a high tax bracket now
• You expect to be in a lower bracket in retirement
• You need the tax deduction today
• Your employer offers a match (always take it!)

Roth 401k / Roth IRA

• You're in a low tax bracket now
• You expect higher income later
• You want tax-free growth forever
• You value flexibility (Roth contributions can be withdrawn anytime)

Taxable Brokerage

• You've maxed all tax-advantaged accounts
• You need money before age 59½
• You want no contribution limits
• You're saving for goals 5-15 years out

The Flow of Priority

What Goes Where?

Once you have multiple accounts, it matters what you put in each:

Tax-Deferred (Traditional)

Best for: Bonds, REITs, high-dividend stocks

• These generate taxable income annually
• In a tax-deferred account, that doesn't matter until withdrawal

Tax-Free (Roth)

Best for: High-growth stocks

• If something might grow 10x, you want that growth tax-free
• No taxes on any gains, ever

Taxable

Best for: Index funds, ETFs, stocks you'll hold forever

• These are tax-efficient anyway (low turnover)
• You can tax-loss harvest here
• Long-term gains get favorable rates

Access to Your Money

Building Your Account Stack

Starting out (income < $50k):

• 401k to match only
• Roth IRA if you can
• Emergency fund in HYSA

Growing income ($50-100k):

• 401k to match
• Max Roth IRA
• HSA if available
• More 401k
• Start taxable investing

Higher income ($100k+):

• Max 401k
• Max HSA
• Backdoor Roth IRA
• Taxable brokerage
• Mega backdoor Roth (if available)

Common Mistakes

The Long Game