If you’re new to investing, the first question is: where should you put your money? The right account depends on goals, time horizon, taxes, and flexibility. This guide breaks down the best accounts Americans should consider first, why they matter, and which one to pick based on your situation.
- Roth IRA — great for tax-free withdrawals in retirement
- 401(k) / employer plan — priority if employer match exists
- Taxable brokerage account — flexible investing for all goals
- HSA — triple tax advantage if you have a high-deductible health plan
Table of contents
- Priority list: which accounts to open first
- Roth IRA — advantages & who should open one
- Traditional IRA vs Roth IRA — short comparison
- 401(k) & employer plans — why match matters
- Health Savings Account (HSA) — the underrated retirement tool
- Taxable brokerage accounts — flexibility & strategies
- 529 plans for education
- Custodial accounts for minors
- Choosing the right custodian & low-cost funds
- Sample starter allocations for different goals
- FAQs
1. Priority list: which accounts to open first
- Emergency fund in a high-yield savings account
- 401(k) up to employer match (if available)
- Roth IRA (tax-free growth) — especially for younger investors
- Taxable brokerage account for extra investing
- HSA if eligible (triple tax advantage)
2. Roth IRA — advantages & who should open one
- Tax-free qualified withdrawals in retirement
- Contributions (not earnings) can be withdrawn penalty-free
- Best for younger or lower-tax-rate investors
- 2026 contribution limits and income phaseouts apply — check current IRS limits
3. Traditional IRA vs Roth IRA — short comparison
Traditional IRAs may offer a tax deduction now; Roth IRAs give tax-free income later. Choose based on your current vs expected future tax rate.
4. 401(k) & employer plans — why match matters
If your employer offers a match, contribute at least enough to capture it — it’s an immediate 100%+ return on your money.
5. Health Savings Account (HSA) — the underrated retirement tool
- Contributions are tax-deductible
- Growth is tax-free
- Withdrawals for qualified medical expenses are tax-free
- After age 65, HSA funds can be used like an IRA (taxed if not used for medical expenses)
6. Taxable brokerage accounts — flexibility & strategies
Taxable accounts are best for goals outside of retirement or when you’ve maxed tax-advantaged accounts. Use tax-efficient ETFs, tax-loss harvesting, and long-term holding to reduce taxes.
7. 529 plans for education
529 plans offer tax-free growth for qualified education expenses and are often state-sponsored with age-based portfolios.
8. Custodial accounts for minors (UGMA/UTMA)
Useful for gifting and early investing; funds become the child’s asset at the age of majority.
9. Choosing the right custodian & low-cost funds
- Choose low-fee brokers (Fidelity, Schwab, Vanguard alternatives)
- Prefer broad-market index funds & ETFs as core holdings
- Watch account fees, trading commissions, and fund expense ratios
10. Sample starter allocations (illustrative)
- Young aggressive (20s): 90% equities / 10% bonds (use total market ETF)
- Balanced (30s–40s): 70% equities / 30% bonds
- Conservative (50s+): 50% equities / 50% bonds
FAQs
Which account should a beginner open first?
Start with a 401(k) up to the employer match (if available), then open a Roth IRA. If no employer plan, start a Roth IRA and a taxable brokerage account.
What is the best place to hold tax-inefficient assets?
Tax-inefficient assets (REITs, taxable bonds) are often best placed inside tax-advantaged accounts (IRAs, 401(k)).
How much should I contribute at first?
Aim to save 10%–15% of income total for retirement, increasing over time. Capture employer match immediately.
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