Every account, 2026 limits
| Account | 2026 limit | Tax treatment | Best for |
|---|---|---|---|
| 401(k) / 403(b) / 457(b) / TSP (employer plan) | $24,500 employee; $8,000 catch-up 50+; $11,250 super catch-up ages 60–63; $72,000 total with employer | Traditional: pre-tax in, taxed out. Roth option: after-tax in, tax-free out | Everyone with access — especially with an employer match |
| Traditional IRA | $7,500 ($8,600 if 50+) | Deduction phases out if covered by work plan: single from $81,000, joint from $129,000 | No 401(k), or extra savings beyond it |
| Roth IRA | $7,500 ($8,600 if 50+); income limits apply | After-tax in; tax-free growth and withdrawals in retirement | Young earners, anyone expecting higher taxes later; contributions withdrawable anytime |
| HSA (with HDHP) | $4,400 single / $8,750 family; +$1,000 if 55+ | Triple tax advantage: deductible in, tax-free growth, tax-free out for medical | The single best account in the tax code — fund before IRA if eligible |
| 529 (education) | No federal limit (state caps ~$300–550k); gift-tax rules apply | After-tax in; tax-free growth/withdrawals for education; many states give a deduction | Parents/grandparents saving for college (see Kids & College) |
| Taxable brokerage | Unlimited | No deduction; capital gains taxed at sale (0/15/20% long-term) | After maxing tax-advantaged accounts; bridge money for early retirement |
| SEP IRA / Solo 401(k) | Up to $72,000 | Pre-tax (Solo 401(k) may offer Roth) | Self-employed — see Business Owners |
Sources: IRS 2026 limits announcement · IRS COLA table · HSA limits (EY/IRS Rev. Proc. 2025-19)
The order of operations
- 401(k) to the full employer match. If they match 50% up to 6%, contribute 6%. Declining this is declining a raise.
- HSA to the max (if you have a qualifying high-deductible health plan). Triple tax advantage beats everything.
- IRA — Roth or traditional. $7,500/yr. Roth if you're young or in a low bracket; traditional (deductible) if you're a high earner without a work plan.
- Back to the 401(k) to the max ($24,500).
- Mega backdoor Roth (if your plan allows after-tax contributions + in-service rollovers) — advanced, huge payoff.
- 529 / taxable brokerage for what's left.
Roth vs traditional: the real decision
Traditional = tax break now, pay later. Roth = pay now, tax-free later. The math winner is whoever faces the lower marginal tax rate:
- Choose Roth when: you're early-career, in the 10–12% bracket, expect much higher income later, or want tax-free flexibility in retirement.
- Choose traditional when: you're in the 24%+ bracket now and expect a lower bracket in retirement (most peak earners).
- Hedge: many people do traditional 401(k) + Roth IRA — tax diversification for an unknowable future.
Backdoor Roth IRA: earn too much for direct Roth IRA contributions? Contribute $7,500 non-deductible to a traditional IRA, then convert to Roth. Legal and routine — but the pro-rata rule taxes the conversion if you hold other pre-tax IRA money. See the Roth vs traditional calculator.
Asset allocation by age
Your stock/bond mix should glide from aggressive to conservative as you age:
| Age | Typical stock % | Typical bond % | Notes |
|---|---|---|---|
| 20s–30s | 90–100% | 0–10% | Time heals every crash; maximize growth |
| 40s | 80–90% | 10–20% | Still long horizon; start adding ballast |
| 50s | 60–80% | 20–40% | Sequence-of-returns risk begins; protect near-term needs |
| 60s+ | 40–60% | 40–60% | Growth still needed for a 30-year retirement — don't go all-cash |
Rule of thumb: 120 minus your age in stocks is a reasonable starting point; adjust for your actual risk tolerance (which you only truly learn in a crash).
Index funds & target-date funds
- Total US stock index fund (e.g., S&P 500 or total-market): the core of most portfolios. Expense ratios ~0.03% — you keep nearly all the return.
- Total international index fund: 20–40% of stocks for global diversification.
- Total bond index fund: the stabilizer.
- Target-date fund (e.g., "Target 2060"): a one-fund portfolio that auto-adjusts allocation as you age. The best choice if you want to set it and forget it — just make sure the expense ratio is under ~0.15%.
Tax-efficient fund placement
Where you hold assets matters almost as much as what you hold:
- Roth IRA / Roth 401(k): highest-growth assets (stocks) — growth is never taxed.
- Traditional 401(k)/IRA: bonds and REITs — ordinary-income assets sheltered until withdrawal.
- Taxable brokerage: tax-efficient stock index funds; harvest losses; hold 1+ year for long-term capital-gains rates (0%/15%/20%).
- HSA: treat like a Roth — invest aggressively, pay medical bills from cash, let it compound, reimburse yourself decades later.
Costly mistakes to avoid
- Market timing — missing the 10 best days in a decade cuts returns roughly in half. Time in beats timing.
- Chasing performance — last year's hot fund is rarely next year's.
- Too much company stock — your paycheck already depends on your employer; cap company stock at ~10% of investments.
- Cash drag — "waiting for the right time" while inflation eats 3%/year.
- Ignoring the match, then buying crypto — order of operations exists for a reason.
- Checking daily — volatility feels like risk on a screen; it's just noise on a 20-year chart.
FAQs
How much do I need to retire?
The 4% rule: save ~25× your annual spending. Spend $60k/yr → ~$1.5M invested. It's a starting estimate, not gospel — Social Security, pensions, and part-time work all reduce the target. Use the retirement calculator for your numbers.
Should I pay off my mortgage or invest?
Compare your mortgage rate to expected after-tax investment returns (~7–8% for stocks long-term, but volatile). Below ~5% mortgage rate, most analyses favor investing while paying on schedule; above ~7%, extra principal payments look better. Peace of mind counts too — a paid-off home is a real (if illiquid) return.
What if the market crashes right after I invest?
Then you bought the dip on everything after. Lump-sum investing beats dollar-cost averaging about two-thirds of the time historically — but if a lump sum would keep you up at night, splitting it over 6–12 months is a fine emotional hedge.
Do I need a financial advisor?
Most people don't until life gets complex (business sale, inheritance, $1M+ portfolios, tricky tax situations). If you hire one, demand a fiduciary (legally required to act in your interest), fee-only (not commission), and check their record at Investor.gov. Never pay 1%+ annually for someone to put you in index funds you could buy yourself.