My 4 Favorite Investment Accounts

We recently talked about that to start investing, there are really only two main steps: 

• Step 1: Open an account.
• Step 2: Pick the investments for inside that account.

Today, we’ll discuss my four favorite investment accounts. These accounts are all tax-advantaged and match my evolving priorities, like saving for retirement and paying for college.

To help explain why you may want different investment accounts, I’ll show you how I went from a single account in my 20s to 14 investment accounts today.

Even if you’re just starting out in your career or new to investing, it’s likely that you’ll eventually have multiple types of investment accounts.

You’ll almost certainly have different goals and priorities as life moves on.

Before you do anything else, you’ll need to decide what type of investment account matches your investment goals. As we’ll see, investing is about more than just saving for retirement.

By understanding the type of accounts to use that match your evolving priorities, you’ll have a better chance of reaching your goals.

Let’s begin by looking at how my investment accounts have changed from the time I started investing in my 20s to the present day.

My investment accounts in my 20s.

When I started working in my 20s, I had one investment account:

1. My 401(k).

In my 20s, I was just starting my career and was proud to be investing in a 401(k). Back then, tracking my net worth was pretty easy.

Part of the reason I only had one investment account was because I didn’t really know there were other types of accounts.

It wasn’t until I prioritized learning about personal finance that I realized what else was out there.

Quick side note: during law school, I did have a traditional brokerage account with a financial advisor. But, I closed that account when I learned we had set $93,000 on fire.

There were two other main reasons I only had one investment account back then.

First, I had student loan debt to pay off. I didn’t exactly have the means to invest in other accounts.

If you’re in a similar boat and have student loan debt, be sure to check out my post:

10 Student Loan Tips for Lawyers and Professionals

Second, in addition to student loan debt, I also had credit card debt.

It was only after a year of working and seeing my credit card debt grow each month that I decided to do something about it. In a lot of ways, my experience with credit card debt is what led me to start Think and Talk Money.

If you’re likewise dealing with credit card debt, check out my post:

10 Credit Card Tips for Lawyers and Professionals

As time went on, a few things happened that led me to opening more investment accounts.

First, I educated myself and learned that there were other investment accounts I could take advantage of.

Then, as my career progressed, I started making more money. Because I had paid off my student loan debt and credit card debt, I had money leftover to invest.

Finally, I got married and had kids. That meant my investment goals evolved.

To match my evolving goals, it was beneficial to open different types of investment accounts.

My investment accounts at age 40.

Fast forward about 15 years, and my family’s balance sheet looks a little bit different than it did in my 20s.

Between my wife, our three kids, and me, we now have 14 investment accounts:

1. My 401(k)
2. Wife’s 457(b)
3. Wife’s Roth IRA
4. My Roth IRA
5. Wife’s Traditional IRA
6. Wife’s Pension
7. Daughter’s UTMA
8. Son’s UTMA
9. Baby’s UTMA
10. Daughter’s 529
11. Son’s 529
12. Baby’s 529
13. HSA
14. Traditional Brokerage Account

The point in sharing my various account types with you is to give you an idea of how your investment priorities will change over time.

The most savvy investors know how to match their investment accounts to those changing priorities.

With this context in mind, let’s now take a closer look at my four favorite investment account types that help me maximize tax benefits.

With these tax-advantaged accounts, I have a better chance of reaching financial freedom.

Favorite Account No. 1: 401(k)

A 401(k) is likely the first investment account most people will have.

401(k) plans are employer-sponsored retirement plans. Employees can elect to participate in their company’s 401(k) plan and choose from a variety of investment options, usually mutual funds and index funds.

There are four major reasons to invest in a 401(k) plan.

1. You can invest with pre-tax dollars.

That means more of your money gets invested rather than going towards your taxes. When you have more money invested, you can earn more in returns.

2. Your contributions are automatic.

Once enrolled, your employer will automatically deduct money from your paycheck and invest it directly into your investment selections.

Because the money never hits your checking account, you won’t be tempted to spend it on things you don’t really care about. You’ll be used to living without this money because it never hits your account.

You also don’t have to worry about consistently making transfers into your account because it will happen automatically.

3. Your earnings grow tax-free.

In addition to not being taxed on your contributions, you also won’t be taxed on your earnings. That’s a double tax advantage that acts to magnify the power of compound interest. You will be taxed when you make withdrawals.

4. Your employer may offer a match.

Many employers today offer a match to incentive employees to contribute to their 401(k) plans. To qualify for the match, you must be participating in your company’s plan and make contributions yourself. The match is usually a percentage of your overall salary, usually between 3-6%.

For example, if you contribute 5% of your salary, your company may match you with an additional 5% contribution.

If your company offers a match, it’s a no-brainer to take advantage of that match. It’s often described as “free money.”

I don’t like the term “free money” because it implies that you have not earned that money as an employee for your company. I prefer to refer to the company match as a bonus you’ve rightfully earned.

The key is to accept that earned bonus by ensuring you are meeting the minimum requirements to qualify.

401(k) Contribution Limits and Penalties

Keep in mind there are annual limits to how much you can contribute to your 401(k) plan. The IRS regularly increases the contribution limits. In 2025, you may contribute up to $23,500.

If you are between the ages of 50 and 59, or 64 or older, you may contribute an extra $7,500 per year. If you are between the ages of 60 and 63, you may be eligible to contribute up to $11,250.

Also, remember that 401(k) plans are intended for retirement savings. To discourage early withdrawals, a 10% penalty on top of regular income taxes apply to people under the age of 59 ½.

Because of these contribution limits, early withdrawal penalties, or other strategic reasons, you may benefit from another type of investment account.

Let’s look at our next popular type of investment account called a Roth IRA.

Favorite Account No. 2: Roth IRA.

A Roth IRA is another type of retirement investment account that also provides double tax benefits.

Unlike a 401(k), you make after-tax contributions to your Roth IRA. Your earnings then grow-tax free, and your withdrawals are tax-free.

Another major advantage is that you can withdraw your contributions tax-free and penalty-free at any time.

There are penalties if you make withdrawals from your earnings before the age of 59 1/2.

Roth IRA Contribution and Income Limits.

Because of the amazing tax advantages associated with Roth IRAs, there are income limits that apply. In 2025, individuals must have a Modified Adjusted Gross Income (MAGI) of less than $150,000, and joint filers less than $236,000.

On top of the income limits, there are annual contribution limits, as well. In 2025, the contribution limits are $7,000 if you’re under age 50, and $8,000 if you’re over age 50.

Why think about opening a Roth IRA?

For many investors, it’s not a bad idea to consider opening a Roth IRA in addition to your 401(k).

For starters, we mentioned the contribution limits to each account. You may need more money in retirement than just what your 401(k) plan will provide.

For another reason, 401(k) plans and Roth IRAs are treated differently from a tax perspective. It may be wise to have some tax-free income in retirement from a Roth IRA to go along with your taxable income from a 401(k).

You can open a Roth IRA with any number of investment companies, like Vanguard, Fidelity, and Charles Schwab.

Favorite Account No. 3: Health Savings Account (HSA)

A Health Savings Account (HSA) is another tax-advantaged account that you can use to pay for eligible medical expenses.

HSAs are linked to employer-sponsored health insurance plans. Oftentimes, employers will make an annual contribution to help fund your HSA.

One of the trade-offs to having an HSA is that you’ll need to enroll in a high deductible insurance plan. You are still covered by insurance, but you’ll pay more out-of-pocket each year for medical treatment.

But, if you’re relatively healthy and/or have the means to pay for your present day medical care, you stand to benefit immensely down the road.

That’s because you can choose to invest your HSA contributions just like you might invest in a 401(k) plan. 

If you do so, your contributions, earnings, and withdrawals are all tax-free if you follow some basic rules.

Because of these triple tax benefits, HSAs are my absolute favorite investment account.

Remember, 401(k) plans and Roth IRAs only offer double tax benefits. HSAs are even better because they offer triple tax benefits.

What are the key rules to follow with HSAs?

To get the triple tax benefits, you need to follow some basic rules.

One of the key rules is that you must use your withdrawals for eligible medical expenses. The good news is that “eligible medical expenses” is a very broadly defined term.

You can take a look here for a comprehensive list of eligible medical expenses. Some examples include prescriptions, contact lenses, and flu shots.

Another key rule to know is that there are no time limits for when you have to use your HSA funds. As long as you keep your receipts, you can reimburse yourself for eligible medical expenses years, or even decades, later.

If you put these two rules together, you’ll see why HSAs are so beneficial.

As long as you have the means to pay out-of-pocket for your current medical expenses, you can allow your pre-tax HSA investments to grow tax free for years.

That means you can take advantage of the magic of compound interest for decades, tax-free.

Then, years later, you can withdraw those funds to reimburse yourself for eligible medical expenses you paid for years prior.

HSA contribution limits.

Like 401(k) plans and Roth IRAs, there are annual contribution limits for HSAs.

In 2025, the contribution limit for an individual with self-coverage is $4,300 and $8,550 for family coverage.

Favorite Account No. 4: 529 College Savings Plan

529 college savings plans are state-sponsored, tax-advantaged investment accounts.

While there are certainly other ways to save for college, 529 plans are hard to beat because they typically offer triple tax benefits.

To read more, check out my in-depth post on 529 Plans for Sky High College Costs:

529 Plans for Sky High College Costs

What do you think of my 4 favorite investment accounts?

There are certainly others, but these are my 4 favorite investment account types. Each comes with tax advantages that will help me reach financial freedom sooner.

As your life and priorities change, you may also benefit from opening multiple investment account types.

So, what do you think of my four favorite investment accounts?

Did I miss any?

Let us know in the comments below.