Tax-Advantaged Accounts

Most high earners invest first, and optimize taxes later. If you're doing that, you may be missing one of the easiest “guaranteed returns” in personal finance: tax-advantaged accounts.

Key numbers

Account comparison

How the accounts work

Tax-advantaged accounts are accounts with special tax treatment. The government gives tax breaks to encourage saving for retirement, healthcare, and education. At a combined federal and state marginal rate of roughly 44%, every dollar deferred saves roughly 44 cents in taxes today.

1. HSA: A Health Savings Account is available to anyone enrolled in a high-deductible health plan. Contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. No other account gets a triple tax advantage. And after age 65, you can withdraw for any reason without penalty, making it function as a secondary retirement account. Contributing the 2026 individual maximum of $4,400 saves about $1,950 in taxes at a 44% marginal rate.

2. Solo 401(k): A Solo 401(k) is a retirement plan designed for self-employed individuals with no employees. It has two contribution buckets: an employee deferral (up to $24,500 in 2026) and an employer contribution (up to 25% of W-2 wages for S-Corps, or roughly 20% of net self-employment income for sole proprietors). The combined limit is $72,000. Contributing $24,500 as the employee and $37,500 as the employer (25% of a $150,000 salary) totals $62,000 in pre-tax contributions, saving about $27,500 in taxes.

3. Backdoor Roth IRA: A Roth IRA offers tax-free growth and tax-free withdrawals in retirement, but direct contributions are fully phased out above $168,000 (single) in 2026. The backdoor strategy gets around this by contributing to a traditional IRA (no income limit on non-deductible contributions), then immediately converting to a Roth. No tax savings today, but the money grows tax-free forever.

4. Mega Backdoor Roth IRA: The Solo 401(k) has a total annual limit of $72,000, but pre-tax contributions often don't reach that ceiling. The mega backdoor strategy fills the gap by making after-tax contributions to the 401(k) and immediately converting them to Roth. Not every plan supports this, so it needs to allow both after-tax contributions and in-plan Roth conversions from the start.

Putting it together

Between the HSA, Solo 401(k), Backdoor Roth, and Mega Backdoor Roth, you shelter $83,900. The pre-tax contributions (HSA and 401(k)) save about $29,500 in taxes today. The Roth contributions save nothing today, but grow tax-free forever. A mix of both makes sense. Pre-tax accounts bet that your tax rate will be lower in retirement. Roth accounts bet that it won't be, or that you'll want flexibility.

What changed in 2026

Starting in 2026, the SECURE 2.0 Act requires that employees earning over $150,000 make catch-up contributions as Roth — not pre-tax. If you're earning $750,000 and making catch-up contributions to your Solo 401(k), those additional dollars must go in after-tax as Roth. This doesn't change the total amount you can contribute, but it does change the tax treatment of the catch-up portion.