Overview of Tax-Advantaged Accounts

Table 8.1: Comparison of Tax-Advantaged Accounts, Limits for 2026

Account	Account type	Comments & Nuances	Single	Married
Health Savings Account (HSA)	medical account; untaxed contributions + grows tax deferred + untaxed withdrawals.	HDHP medical insurance. Any medical use. Flexible, but limited contributions. If 65+ years old, can withdraw money for any purpose but must pay income taxes on it. Some states (CA, NJ) don’t recognize HSAs: no state deduction for contributions, and interest, dividends and realized gains inside the account are state-taxable each year. Qualified withdrawals are not separately taxed.	4400 + 1000[ $age \geq 55$ ]	8750 + 1000[ $age 1 \geq 55$ ]+ 1000[ $age 2 \geq 55$ ]
Flexible Spending Account (FSA)	expense account; untaxed contributions + untaxed withdrawals; no investments	medical insurance $\neq$ HDHP. Any medical use. Must decide how much to allocate in advance. Balances above $680 are lost at year’s end.	3400	3400
Limited-Purpose FSA	expense account; untaxed contributions + untaxed withdrawals; no investments	HDHP medical insurance. Dental & vision, medical after deductible met. Balances above $680 are lost at year’s end.	3400	3400
Dependent Care FSA	expense account; untaxed contributions + untaxed withdrawals; dependent care; no investments	Restricted use. Must decide how much to allocate in advance. Balances are lost at year’s end. Pay expenses using pre-tax money.	7500	7500 (both must have income)
Commuter transportation benefit	expense account; untaxed contributions + untaxed withdrawals; qualified transportation expenses; no investments	Restricted use (E.g. public transport, parking near office). Must decide how much to allocate in advance. Balances are lost at year’s end. Pay expenses using pre-tax money.	4080 = 340 $\times$ 12	4080 = 340 $\times$ 12 each
Pre-tax 401(k)	retirement account; untaxed contributions + grows tax-deferred + taxed withdrawals	Must come directly from salary or bonus, not RSUs. Reduces taxable income. If you can afford the immediate tax, prioritize a Roth 401(k) over pre-tax. Some taxes are extracted. Employer matching possible. This should rank lower than an HSA if your retirement income tax rate $\leq 1 ∕ 3$ . Or, if you use a Roth 401(k), if your current income tax rate $\leq 1 ∕ 3$ .	24500 + 8000 [ $age \geq 50$ ], or 11250[ $60 \leq age \leq 63$ ]	each 24500 + 8000[ $age \geq 50$ ] or 11250[ $60 \leq age \leq 63$ ]
ABLE account for a disabled individual	expense account; taxed contributions + grows tax-deferred + untaxed withdrawals	Disability must have begun before age 46 — raised from 26 by the ABLE Age Adjustment Act effective 2026-01-01, which added roughly 6 million newly eligible people. Other restrictions apply. Anyone can contribute to anyone’s ABLE account. Pays for qualified expenses, e.g., housing, transportation, and basic living expenses. Money does not affect eligibility for SSI (if < $100K in account) and Medicaid. Thus, permits savings money for disabled individuals. Selection is quite limited. Plans can have non-trivial expenses. Aggregate balance caps vary by state, e.g., $235K-$550K. Can rollover 529 contributions to ABLE account, e.g., learn person is disabled after starting saving in a 529 plan. Tax-free growth and distribution. OBBBA decoupled the annual limit from the gift-tax exclusion, so 2026 is $20,000 (up from $19,000). A working beneficiary not in an employer retirement plan may add ABLE to Work contributions up to the lesser of their compensation or the prior year’s one-person federal poverty level ($15,650 in the contiguous states), plus the federal saver’s credit; some states permit state-tax-free contributions.	20,000 + up to 15,650 if working and not enrolled in a retirement account	same for each
Deductible traditional IRA	untaxed contributions + grows tax-deferred + taxed withdrawals	Must open one’s own IRA. Must contribute earned income. Low limits on maximal income for contribution. If eligible, allocate to a Roth IRA or an after-tax traditional IRA (for backdoor conversion) instead of a deductible traditional IRA. As good as pre-tax 401(k) but no company match. Spouse can contribute directly from earned income. Otherwise, use a Spousal IRA.	7500 + 1100 [ $age \geq 50$ ]	7500 + 1100 [ $age \geq 50$ ].
After-tax 401(k) with in-plan Roth conversion (“megabackdoor”)	retirement account; taxed contributions + grows tax-deferred + untaxed withdrawals	Must come directly from salary or bonus, not RSUs. Post-tax money so your contribution is taxed but is not taxed upon withdrawal if you …register for automatic after-tax $\to$ Roth conversions so that withdrawals will not be taxed. Crazy tax laws require the 2-step contribution and then conversion. Almost as good as an unmatched pre-tax 401(k) contribution but is slightly worse because of uncertainty about the future. If you know your retirement income tax rate ( $T_{r}$ ) is higher than now ( $T_{n}$ ), contributing post-tax money now is better.	35,250	35,250 (each)
Roth IRA	retirement account; taxed contributions + grows tax-deferred + untaxed withdrawals	Must open one’s own IRA. Must contribute earned income. Contribution limits participation in a Roth IRA. If so, do the 2-step: contribute to an after-tax traditional IRA and then immediately convert to a Roth; crazy tax laws! (“backdoor Roth IRA”) Do not allocate to a deductible traditional IRA if you allocate money in this step. As good as after-tax 401(k), but can be slightly less convenient. Some may order this step higher than the after-tax 401(k), e.g., arguing about investment choices, required minimum distributions, legal protections, and ability to withdraw money early.	7500 + 1100 [ $age \geq 50$ ]	7500 + 1100 [ $age \geq 50$ each]
Spousal Roth IRA or after-tax traditional IRA + Roth Conversion	retirement account; taxed contributions + grows tax-deferred + untaxed withdrawals	If your spouse is not working, they may create and fund an IRA from your income. Must open the IRA. Must contribute from spouse’s earned income. Contribution limits participation in a Roth IRA. If so, do the 2-step: contribute to an after-tax traditional IRA and then immediately convert to a Roth; crazy tax laws! Do not allocate to a deductible spousal traditional IRA if you allocate money in this step. Ties with the non-spousal Roth IRA.	n/a	7500 + 1100 [spouse $age \geq 50$ ][spouse’s income is minimal]
529 plan (qualified tuition program)	savings for education; taxed contributions + grows tax-deferred + tax-free withdrawals	Withdrawals should be used for beneficiary’s education expenses, typically college expenses. Some states will reduce state income tax or augment 529. If withdrawn for non-qualified purposes, pay 10% penalty on earnings only. If unused can be transferred to another beneficiary or Roth IRA (starting 2024). Read about restrictions before investing. As good as a Roth IRA except for limitations on its use. Some will argue that one’s own retirement is more important than a child’s education because there are other ways to fund the latter; this is probably true.	19,000 per beneficiary but can contribute 5 years’ worth (95,000) at once. More if willing to deal with gift tax.	38,000 per beneficiary but can contribute 5 years’ worth (190,000) at once. More if willing to deal with gift tax.
pre-tax 401(k) $\to$ post-tax 401(k), including converting Employer match. Roth 401(k) is an optimization.	retirement account; taxed contributions + grows tax-deferred + untaxed withdrawals	Pay taxes now to convert pre-tax 401(k) contributions, which are taxed upon withdrawal, to post-tax contributions, which are not taxed upon withdrawal. Furthermore, withdrawals will not increase your taxable retirement income so your retirement income tax rate may be lower than otherwise. With one trick, you will not be forced to withdraw money ever, unlike for pre-tax 401(k)s. If you are able to allocate to a Roth 401(k) including catch-up, contribute directly to the Roth 401(k) instead of funding pre-tax and converting later. Consider converting your pre-tax Employer match Conversions are not always a financial win. Note this row has no contribution limit of its own: it moves money you already hold, so the ceiling is your existing pre-tax balance and the tax you can afford to pay in cash this year — not a §402(g) or §415(c) figure. As good as Roth IRA or 529 except those options increase the investment in tax-deferred accounts and this does not. Depends on your federal + state income tax rate $T_{n}$ . Pay taxes now at your current income tax rate to convert.	no statutory cap	no statutory cap
Series EE and I Savings Bonds	unrestricted account; taxed contributions + grows tax deferred + taxed withdrawals	U.S. government bonds with 30-year lifetimes. Only federally taxable, and tax-deferred until bond is redeemed. Tax-free if used for college for self or child (subject to low income limits). Treasury ended the $5,000 paper I-bond purchase by tax refund on 2025-01-01, so TreasuryDirect is now the only channel. EE bonds earn fixed-rate interest. I bonds earn a lower, fixed-rate interest + inflation-adjusted interest. Must use Treasury Direct. Tax-deferred growth but only bond-level return. Default risk-free, but absolute return makes tax advantage savings minimal. Generally preferable over a savings account, MMA, CD or similar.	10,000 (EE) + 10,000 (I), electronic only	10,000 (EE) + 10,000 (I) each, so 20,000 + 20,000 for a couple

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