One way to maximize your investments is to minimize how much you pay in taxes, while of course following tax laws. 

The table below summarizes many of the common investment structures available to investors, along with the considerations of putting money in, taking money out, and options along the way. Positive aspects are in green text and negative aspects are in red text. Underlined words in the table are linked to outside resources that I recommend if you want to learn more.

It goes without saying, but I will say it explicitly anyways: I am not a CPA, CFP, or tax professional of any kind, and you must do your own due diligence and/or consult with a professional before taking action on any specific item here.

Investment Structure Putting money in Along the way Taking money out
HSA

No taxes paid

Contribution amount limited by IRS 

Must be in a qualified health insurance plan

Employer contribution counts towards contribution limit

No taxes paid

Pay out of pocket (i.e. if at all possible don’t use the HSA to pay) and save your qualified medical expense receipts

Invest the HSA funds into the investment option(s) provided by your HSA custodian

No taxes paid with receipts for qualified medical expenses
401(k)

No taxes paid

Contribution amount limited by IRS

Contributions must be made in the calendar year

Eligibility depends on employer

Employer contribution does not count towards salary deferral limit

No taxes paid

Re-balance portfolio in tax advantaged accounts to avoid taxable events

Taxes paid*

*Early access strategies (Mad Fientist)

Required minimum distributions (IRS page)

Roth 401(k)

Taxes paid

Contribution amount limited by IRS

Contributions must be made in the calendar year

Eligibility depends on employer

Employer contribution does not count towards salary deferral limit

No taxes paid

Re-balance portfolio in tax advantaged accounts to avoid taxable events

No taxes paid

Convert to Roth IRA

Required minimum distributions (IRS page)

Traditional IRA

Tax deductible if marginal adjusted gross income is below IRA limit or you are not covered by a retirement plan at work

Contribution amount limited by IRS 

Contributions can be made up until the tax filing deadline of the following year (~April 15th)

No taxes paid

Re-balance portfolio in tax advantaged accounts to avoid taxable events

May interfere with Backdoor or Mega Backdoor Roth (see Roth IRA)

Taxes paid*

*Early access strategies (Mad Fientist)

Required minimum distributions (IRS page)

Roth IRA

Taxes paid

Contribution amount limited by IRS**

IRS limits eligibility based on marginal adjusted gross income*

Contributions can be made up until the tax filing deadline of the following year (~April 15th)

*Backdoor Roth (White Coat Investor)

**Mega Backdoor Roth (Mad Fientist)

No taxes paid

Re-balance portfolio in tax advantaged accounts to avoid taxable events 

No taxes paid

Contributions can be taken out at any time

Conversions must “season” for five years before being taken out*

*May be  avoided in special circumstances (SWL blog post)

Non-Tax-Advantaged Investments

You can invest whatever taxable income you haven’t put into the above tax-advantaged structures

If investing in securities, select tax efficient options (Basic Idea, Specific Examples)

Will not be sheltered from lawsuit or bankruptcy as 401(k) and IRA accounts may be, unless you set up a specific legal structure such as for real estate or business

Interest may be taxed (Investopedia)

Dividends may be taxed (Motley Fool)

Capital gains distributions will be taxed (Investopedia)

Tax loss harvesting (SWL blog post)

Tax gain harvesting (Mad Fientist)

Real estate profit will be taxed*

*Real estate tax advantages (Mad Fientist post / Bigger Pockets book)

Business profit will be taxed**

**Business tax advantages (Wealthy Accountant)

Selling may trigger capital gains tax*

*Depends on federal tax bracket (The Balance)

*Real estate can be 1031 exchanged without paying capital gains tax

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