What Accounts Should I Consider If I Want To Save More? (2023)

If so, consider the following: – If you have a spouse or partner and you both are employed, you may want to set aside three months of living expenses in case of an emergency. – If you are single or the sole income earner, you may want to set aside six months of living expenses in case of an emergency. – If you are a high-income earner or entrepreneur, you may want to set aside as much as 18 months of living expenses to take advantage of job mobility and business opportunities.

If so, consider the benefits and risks associated with high-yield saving/checking accounts, CDs, and other conservative investments.

If so, consider making a pre-tax/tax-deductible contribution of $3,050, which can be used on medical, dental, and vision care. Be sure to spend any funds that can’t be carried over by the end of the year (or any grace period offered by your plan), as you may lose any remaining funds.

If so, consider making a pre-tax/tax-deductible contribution of up to $3,850 ($7,750 for a family) and an additional $1,000 if you are age 55 or over. The HSA is the most tax-preferred vehicle available. See “Can I Make A Deductible Contribution To My HSA?” flowchart for details.

If so, review what amounts you are eligible to deduct or contribute, respectively.

If so, consider the following: – Make sure you contribute enough to maximize the amount of any match offered by the employer. – You can contribute up to $22,500 annually ($30,000 if age 50 or over) if your employer plan is a 401(k), 403(b) or 457. – You can contribute up to $15,500 annually ($19,000 if age 50 or over) if your employer plan is a SIMPLE IRA or SIMPLE 401(k). – If you have made the maximum salary deferral contribution and want to contribute more, consider if a Mega Backdoor Roth contribution is applicable. Reference “Can I Make A Mega Backdoor Roth Contribution?” flowchart.

If so, consider the following: – If permitted, make a designated Roth contribution and pay taxes now at the lower rates. – Contribute up to $6,500 ($7,500 if age 50 or over) to a Roth IRA. Eligibility is phased out between $138,000 – $153,000 MAGI (single) and $218,000 – $228,000 MAGI (MFJ). See “Can I Contribute To My Roth IRA?” flowchart.

If so, a Backdoor Roth IRA contribution could allow you to save an extra $6,500 ($7,500 if age 50 or over). Reference “Can I Make a Backdoor Roth IRA Contribution?” flowchart.

If so, consider participating and review your selling strategy in advance.

If so, consider the following: – You can contribute up to $66,000 ($73,500 if age 50 or over) in a 401(k), including your employer and employee contributions. See “Should I Set Up A Traditional 401(k) For My Business?” flowchart. – You can save more than the above amounts by opening and contributing to a pension plan. Contribution amounts will vary depending on several factors, such as the ages of the employees.

If so, consider the following: – Offering your children paid positions within the business can allow them to save in their name (and to be taxed at their income bracket). A Roth IRA may be an appealing account to fund. – Single member LLCs, sole proprietorships, and partnerships where the only owners are the parents don’t have to pay FICA taxes on the earnings of a minor child.

If so, consider using a 529 plan to save for college: – You can use your annual exclusion amount to contribute up to $17,000 per year to a beneficiary’s 529 account, gift tax-free. – Alternatively, you can make a lump sum contribution of up to $85,000 to a beneficiary’s 529 account, and elect to treat it as if it were made evenly over a 5-year period, gift tax-free. – You may be eligible for a state income tax deduction or credit if you contribute to a plan sponsored by your state.

If so, consider the following: – UTMA/UGMA accounts could be used to save on behalf of minor children (or grandchildren). Be mindful of Kiddie Tax rules. – Dynasty trusts could be used to provide funds for many future generations. Each state has specific rules regarding the vesting of interests and maximum duration of trusts.

If so, consider the following: – If you have maxed out your savings in tax-deferred accounts, this option may be attractive as it provides tax deferral on the gains. – Depending on the contract, some annuities offer very few guarantees, resulting in low-cost options.

If so, consider the benefits of buying a cash value life insurance policy, which can provide both life insurance and tax deferral on the gains.

If so, consider a taxable brokerage account: – Long-term gains are taxed at preferential rates upon the sale (no tax at distribution from the account). Qualified dividends are also taxed at preferential rates. – Some investments (tax-managed funds, zero-dividend stock funds, municipal bond funds, ETFs) can further mitigate any tax liability.

If so, consider utilizing a Donor Advised Fund.

If so, consider paying down high-interest debt instead of saving more.