Which Retirement Account is Best for You? Comparing 401K, IRAs, and HSAs with Tax Advantages in the U.S.
Today, we're going to talk about some of the most common types of tax-advantaged accounts that are available to you as an investor and explain how they work. First up, let's talk about 401(k)s. A 401(k) is a retirement savings plan that's sponsored by your employer. You contribute a portion of your paycheck to the plan, and that money is invested in a variety of different funds, stocks, and other investments. The best part? The money you contribute is tax-deductible, which means it reduces your taxable income for the year. So, let's say you earn $50,000 per year and you contribute $5,000 to your 401(k). You would only pay taxes on $45,000 of income, which could save you hundreds or even thousands of dollars in taxes each year. Additionally, any money that you earn in your 401(k) account is tax-deferred, which means you don't pay taxes on it until you withdraw the money in retirement. Next up, let's talk about Roth IRAs. A Roth IRA is a type of indiv