Tax-Advantaged Accounts Cheat Sheet

The U.S. tax code gives you legal ways to keep more of your money — but only if you know which accounts to use and in what order. Most people in their 20s leave tens of thousands of dollars in tax benefits on the table. Not because the math is hard, but because nobody lays it out clearly.

This cheat sheet fixes that. Every account type, every 2026 limit, every decision framework — organized so you can make the right move for your specific situation. For the introductory overview, see our Tax-Advantaged Accounts Explained blog post. This guide goes deeper.

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What Are the Tax-Advantaged Account Options for 2026?

There are five main tax-advantaged accounts available to most Americans in 2026: the 401(k), Roth IRA, Traditional IRA, Health Savings Account (HSA), and 529 plan. Each offers a different tax benefit — tax-deferred growth, tax-free withdrawals, or the rare triple tax advantage.

The differences matter. Choosing the wrong account — or funding them in the wrong order — can cost you six figures over a career. Here's the landscape:

Each of these accounts plays a different role in your financial system. The key is knowing which ones to use first — and that depends on your income, your employer benefits, and your time horizon. For foundational context on understanding your tax bracket, start there.

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What Are the 2026 Contribution Limits for Every Account?

The 2026 contribution limits are $23,500 for a 401(k) ($31,000 if 50+), $7,000 for IRAs ($8,000 if 50+), $4,300 for an individual HSA ($5,300 if 55+), and $8,550 for a family HSA ($9,550 if 55+). There is no federal contribution limit on 529 plans.

These limits change annually. Bookmark this table:

*Traditional IRA deduction phase-out applies only if you're covered by an employer retirement plan. If you don't have a 401(k), you can deduct Traditional IRA contributions at any income level.

The total maximum tax-advantaged space for an individual with an HDHP is $34,800/year ($23,500 + $7,000 + $4,300). That's a lot of room to shelter from taxes — and most people don't come close to filling it.

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How Does a 401(k) Work and When Should You Use It?

A 401(k) is an employer-sponsored retirement plan that lets you invest pre-tax dollars (traditional) or after-tax dollars (Roth 401(k)), reducing your taxable income. You should always contribute at least enough to capture your full employer match — it is a guaranteed, immediate return on your money.

The employer match math

Say you earn $60,000 and your employer matches 50% of your contributions up to 6% of your salary. Contributing 6% means $3,600/year from you — and $1,800 free from your employer. That's an instant 50% return before your investments grow by a single penny. Not contributing enough to get the full match is literally leaving salary on the table.

Plug that $1,800/year of free employer match into the Compound Interest Calculator over 40 years at 8% — it grows to over $500,000. From money you never earned through work.

Roth 401(k) — the hybrid option

Many employers now offer a Roth 401(k) alongside the traditional version. Contributions come from after-tax dollars (no deduction now), but qualified withdrawals in retirement are completely tax-free. If you expect to be in a higher tax bracket later, or you simply want the certainty of tax-free retirement income, the Roth 401(k) is worth considering.

What to watch for

• Vesting schedule: Your employer's matching contributions may vest over 3–6 years. If you leave before fully vested, you forfeit a portion of the match.
• Investment options: 401(k) plans have limited fund menus. Look for low-cost index funds — specifically target-date funds or total market index funds with expense ratios under 0.20%.
• Fees: Some 401(k) plans have high administrative fees. If your plan has poor options and no match, it may be better to prioritize an IRA.

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Should You Choose a Roth IRA or a Traditional IRA?

If you are in your 20s or 30s earning under $100,000, a Roth IRA is almost always the better choice. You pay taxes at today's lower rate and lock in tax-free growth for decades — the math strongly favors Roth when you have a long time horizon.

But the real answer depends on your specific situation. Here's the decision matrix:

The key variable is your current tax rate vs. your expected future tax rate. If you think you'll earn more later (most people in their 20s will), Roth wins because you're paying taxes at the low end. For a deeper dive, see our Roth IRA vs. Traditional IRA comparison.

One often-overlooked Roth advantage: you can withdraw your contributions at any time, penalty-free and tax-free. This makes the Roth IRA a surprisingly flexible backup emergency fund — not the primary reason to open one, but a genuine safety valve.

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Why Is the HSA the Most Powerful Tax-Advantaged Account?

The HSA is the only account in the U.S. tax code with a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. No other account — not the 401(k), not the Roth IRA — offers all three.

The stealth retirement account strategy

Here's the part most people miss: you don't have to spend your HSA money now. You can invest it, let it grow for decades, and reimburse yourself for past medical expenses later — even years later, as long as the expense occurred after you opened the account. Save your medical receipts. Pay out of pocket now. Let your HSA compound.

After age 65, you can withdraw for any reason — non-medical withdrawals get taxed like a Traditional IRA (ordinary income), but there's no penalty. This effectively makes the HSA a super-charged retirement account with a healthcare bonus attached.

The math

If you contribute $4,300/year to an HSA and invest it at an average 8% return for 30 years, you'd accumulate roughly $490,000 — entirely tax-free for medical expenses, or taxable-only (no penalty) for anything else after 65. Use the Compound Interest Calculator to model your specific scenario.

Who qualifies

You need a High-Deductible Health Plan (HDHP). In 2026, that means a deductible of at least $1,650 for individuals or $3,300 for families. If your employer offers an HDHP option — even if it seems intimidating — the HSA access alone can make it the better financial choice, especially if you're young and healthy.

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When Does a 529 Plan Make Sense?

A 529 plan makes sense if you are saving for education expenses — your own, a child's, or a family member's. Growth and qualified withdrawals are tax-free, and many states offer a state income tax deduction on contributions.

What counts as "qualified"

• College tuition, fees, books, room and board, supplies, computers
• K-12 tuition (up to $10,000/year)
• Apprenticeship program expenses
• Student loan repayment (up to $10,000 lifetime per beneficiary)

The SECURE 2.0 game-changer

Starting in 2024, unused 529 funds can be rolled into a Roth IRA for the beneficiary — up to $35,000 lifetime, subject to annual Roth IRA contribution limits, and the account must be at least 15 years old. This eliminates the biggest 529 fear: "What if my kid doesn't go to college?" Now there's a clean escape hatch.

When a 529 does NOT make sense

If you haven't maxed out your retirement accounts (401(k), IRA, HSA), retirement should come first. You can borrow for education; you can't borrow for retirement. The 529 is the right move once your retirement savings are on track.

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What Is the Best Order to Fund Your Accounts?

The most tax-efficient order for most people is: (1) 401(k) up to the employer match, (2) HSA to the max if eligible, (3) Roth IRA to the max, (4) 401(k) above the match toward the $23,500 limit, and (5) taxable brokerage account once all tax-advantaged space is filled.

Why HSA before Roth? This may differ from simpler guides (including our own introductory blog post), which often place Roth IRA second. The reason: the HSA's triple tax advantage is objectively more tax-efficient than the Roth's double advantage. If you have HDHP access, it should come first. If you don't have an HDHP, skip Step 2 and go straight to Roth.

Use the Budget Calculator to see how much of your monthly income you can realistically direct toward these accounts. Even filling half of the $34,800 total puts you well ahead of most Americans.

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How Should Your Strategy Change Based on Income?

Your account priority shifts at three income thresholds. Under $50K: focus on employer match and Roth IRA. Between $50K and $150K: add HSA and push 401(k) higher. Above $150K: maximize everything and use backdoor Roth strategies.

Check where you stand with the Retirement Readiness Calculator — it shows whether your current contribution rate has you on track based on your age, income, and savings.

Remember: these are frameworks, not rigid rules. If you're under $50K and can only contribute $50/month, that's still infinitely better than $0. The how much to invest per month guide walks through realistic starting points at every income level.

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What Are the Withdrawal Rules and Penalties?

The general rule is a 10% early withdrawal penalty plus income taxes on distributions before age 59½, but there are significant exceptions. Roth IRA contributions can be withdrawn anytime penalty-free and tax-free, and HSA withdrawals for medical expenses are always tax-free.

Here's the full breakdown:

The Roth IRA flexibility advantage: Because you can always withdraw your contributions (not earnings) penalty-free, the Roth IRA doubles as a last-resort emergency fund. This doesn't mean you should use it that way — but knowing the option exists reduces the risk of locking money away you might need. For more on building a proper emergency fund, see the emergency fund guide.

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What Is a Backdoor Roth IRA and Do You Need One?

A backdoor Roth IRA is a legal strategy that allows high earners above the Roth IRA income limits to still get money into a Roth IRA. You contribute to a Traditional IRA (non-deductible) and then immediately convert it to a Roth IRA. You need one if your income exceeds $150,000 (single) or $236,000 (married filing jointly) in 2026.

The 4-step process

1. Contribute $7,000 to a Traditional IRA — mark it as non-deductible (you won't claim a tax deduction)
2. Convert the entire balance to a Roth IRA — most brokerages make this a one-click process
3. Pay taxes on any gains between contribution and conversion (usually minimal if done within days)
4. Report on Form 8606 when you file taxes — this documents the non-deductible contribution

The pro-rata rule — the trap to watch for

If you have existing pre-tax money in any Traditional IRA, the conversion gets taxed proportionally. For example, if you have $93,000 in pre-tax Traditional IRA funds and contribute $7,000 non-deductible, 93% of your conversion gets taxed — defeating the purpose. The cleanest backdoor Roth requires $0 in existing Traditional IRA balances. If you have old Traditional IRA money, consider rolling it into your 401(k) first.

Mega backdoor Roth (for the ambitious)

Some employer 401(k) plans allow after-tax contributions above the $23,500 limit (up to $70,000 total including all sources in 2026) and offer in-plan Roth conversions. This "mega backdoor Roth" can shelter an additional $30,000+ per year in Roth space. Check if your plan allows it — not all do.

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How Much Could Tax-Advantaged Accounts Save You Over a Career?

A person who consistently uses tax-advantaged accounts from age 25 to 65 could save between $200,000 and $500,000 in total taxes compared to using only taxable accounts, depending on income, tax bracket, and investment returns.

A concrete example

Meet Alex, 25 years old, earning $65,000. Alex contributes to a 401(k) up to the employer match ($3,600 + $1,800 match), maxes a Roth IRA ($7,000), and puts $2,000 into an HSA. Total: $14,400/year in tax-advantaged accounts.

• Year 1 tax savings: ~$5,500–$7,500 from the 401(k) deduction + HSA deduction alone
• Over 40 years (8% return): The tax-advantaged accounts grow to roughly $4.1 million
• In a taxable account: The same contributions grow to roughly $3.4 million (after capital gains taxes erode returns each year)
• The tax advantage gap: ~$700,000 — the combined value of avoided taxes on contributions, growth, and withdrawals

Model your own numbers with the Compound Interest Calculator and see where you land with the Retirement Readiness Calculator. The difference between tax-advantaged and taxable compounding is the single most impactful financial decision you'll make.

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What Is the Bottom Line on Tax-Advantaged Accounts?

Tax-advantaged accounts are the single most powerful wealth-building tool available to ordinary people. The priority order matters, the 2026 limits matter, and every year you delay using them is a year of free tax benefits you can never get back.

The action plan is straightforward:

1. Get the employer match — guaranteed return, no brainer
2. Max the HSA (if eligible) — triple tax advantage is unbeatable
3. Max the Roth IRA — tax-free growth for decades
4. Push the 401(k) higher — fill the remaining tax-advantaged space
5. Then, and only then, use a taxable brokerage account

You don't need to max everything tomorrow. Start where you are. Automate what you can. The system works because it compounds — both the money and the tax savings. For the complete investing starter framework, start there. For a quick check on whether you're on track, use the Retirement Readiness Calculator.

This guide covers 2026 rules and limits. Contribution limits, income thresholds, and tax rules are updated annually by the IRS. We update this page when new numbers are released.