Types of Savings Accounts: Your Guide to Tax-Efficient Retirement Savings

There are many ways to save. How can you choose the right mix of accounts that will help you maximize the way you live today and maximize what you’ll have available for retirement?

Most people understand the importance of diversifying their investments. By allocating funds to different asset classes like stocks, bonds, and alternatives, you can potentially reduce your risk of a negative outcome from any one event or investment. But how familiar are you with the different types of savings accounts and their advantages and disadvantages?

By allocating money to a mix of accounts that offer different tax treatments, you can manage how much of your retirement income will be taxed — and at what rate. The key is to select an optimal mix of accounts. You have several types to choose from, so consider working with a financial advisor to choose the right combination for you.

Taxable Accounts

Taxable accounts are standard bank and brokerage accounts funded with your earnings. These may be held individually or jointly with a spouse or partner.

• Taxation: Any interest or dividends earned during the year are taxed. If you sell investments and have a net gain, you owe capital gains taxes.
• Flexibility: You can contribute or withdraw funds without limitation or penalty and without any taxable consequences.
• No RMDs: These accounts are exempt from required minimum distributions (RMDs), so you’re never forced to withdraw money.

Tax-Deferred Accounts

Traditional IRAs, 401(k) plans, and 403(b) plans are all tax-deferred accounts held individually with named beneficiaries.

• Tax Benefits: Contributions can reduce your taxable income in the year they are made. Accounts are funded with pretax dollars, saving you money upfront.
• Growth: Contributions and investment gains are not taxed until withdrawal, allowing the balance to grow without tax deductions.
• RMDs: Required minimum distributions (RMDs) now begin at age 73 for those born between 1951–1959, and age 75 for those born in 1960 or later, thanks to the SECURE Act 2.0.¹ The RMD penalty has also been reduced from 50 percent to 25 percent of the shortfall—and to just 10 percent if corrected within two years.²
• Employer Plans: Some employers offer nonqualified deferred compensation plans, allowing employees to put away a portion of their salary pretax, accumulating tax-free until withdrawal at retirement.

Unlike brokerage accounts, these accounts are funded with pretax dollars. As an example, if you are in the 22 percent tax bracket, for every $1,000 you contribute to your 401(k) plan, you would save $220 in taxes. The benefits are even greater if your company matches some portion of what you save. Your HR team can provide the specific details of your plan.

The additional benefit is that your contributions and any investment gains are not taxed until you make a withdrawal from the account. This allows the account balance to grow without taking anything away to pay taxes.

Once you retire, any money withdrawn from Traditional IRAs, 401(k) plans, or 403(b) plans is taxed at your future income tax rate. For many people, that tax rate is expected to be lower in retirement than it has been during the working years.

Required minimum distributions (RMDs) now begin at age 73 for individuals born between 1951 and 1959, and at age 75 for those born in 1960 or later.¹ These distributions are fully taxable. The intention of the RMD rule is to distribute the account over your life expectancy. Under SECURE 2.0, the penalty for missing an RMD has been reduced from 50 percent to 25 percent of the shortfall amount—and drops to just 10 percent if corrected in a timely manner.²

Some employers offer what are called nonqualified deferred compensation plans. These plans offer individual employees the chance to set aside a portion of their current salary pretax into an account. The money can build and accumulate free of taxes until it is withdrawn at retirement. Check with your HR team to see if you are eligible for such a plan.

2026 Contribution Limits

Mandatory Roth Catch-Up Rule (Effective 2026)
Starting January 1, 2026, employees whose prior-year FICA wages exceeded $150,000 must make all catch-up contributions on a Roth (after-tax) basis. This applies to 401(k) plans, 403(b) plans, and governmental 457(b) plans. If your employer’s plan does not currently offer a Roth option, the plan must add one or eliminate catch-up contributions entirely.⁵

Roth IRAs and Roth 401(k) Plans

Roth IRAs and Roth 401(k) plans are funded with after-tax dollars.

• Tax-Free Withdrawals: Contributions don’t reduce your current taxable income, but withdrawals in retirement are tax-free.
• No Lifetime RMDs: As of 2024, Roth 401(k) plans and 403(b) plans are now aligned with Roth IRAs—none of these accounts require lifetime RMDs. This change from SECURE 2.0 gives you full flexibility to let these accounts grow tax-free throughout your lifetime.⁶
• Beneficiary Benefits: Roth accounts can be passed tax-free to beneficiaries.

While Traditional IRAs are funded with pretax dollars, Roth IRA and Roth 401(k) plan contributions are made with after-tax dollars. That means your contributions won’t reduce your taxable income in the current year. The real benefit of the Roth is that money withdrawn from your account in retirement is not subject to taxes—no ordinary income tax, no capital gains—as long as you follow timing requirements. Roth accounts can also pass tax-free to your beneficiaries.

2026 Roth IRA Income Phase-Out Ranges

If your income exceeds these limits, you may want to explore a backdoor Roth strategy: contribute to a nondeductible Traditional IRA, then convert to a Roth IRA. Consult your financial advisor or tax professional to determine if this approach is right for your situation.

Health Savings Accounts (HSAs)

Health savings accounts (HSAs) are not usually thought of as a retirement account, but they offer a valuable (and potentially tax-smart) way to save. HSAs are not an option for everyone. You are eligible to open an HSA only if you are covered by a high-deductible health plan (HDHP) through your employer or on the individual market.

2026 HSA Contribution Limits

Contributions to an HSA reduce your taxable income. And like an IRA or 401(k) plan, the earnings on your account grow tax-free. With the HSA, you are able to use the money at any time for qualified medical expenses. Any distributions for those qualifying expenses are tax-free.

That means the HSA offers a triple tax benefit—you can reduce taxable income during the years you make contributions, your savings grow tax-free, and you have the ability to pay medical expenses with pretax dollars. For those who can maximize contributions and invest for long-term growth, the HSA may be one of the most tax-efficient accounts available.

After age 65, you can use any funds remaining in your HSA for medical expenses that are not covered by your insurance or Medicare. You also have the option of using your HSA funds to pay non-medical expenses, but those withdrawals may be subject to income tax.

HSA Eligibility Expanded Under the One Big Beautiful Bill Act

Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) made several changes that expand HSA access, effective January 1, 2026:⁸

• Bronze and catastrophic ACA exchange plans: These plans are now classified as HSA-compatible HDHPs, allowing more individuals to open and contribute to HSAs.⁸
• Direct Primary Care (DPC) arrangements: Individuals with DPC memberships (up to $150/month individual, $300/month family) can now contribute to an HSA, and DPC fees are considered qualified medical expenses.⁸
• Pre-deductible telehealth: HDHPs can now permanently cover telehealth services before the deductible without affecting HSA eligibility.⁸

Beyond Retirement: 529 Plans and Education Savings

While this guide focuses on retirement accounts, 529 college savings plans offer similar tax advantages for education funding and may complement your broader financial strategy.

• Tax-free growth: Contributions grow tax-deferred, and withdrawals for qualified education expenses are tax-free at the federal level.
• K–12 withdrawal limit doubled: Starting in tax year 2026, the OBBBA increased the annual K–12 withdrawal cap from $10,000 to $20,000 per beneficiary, covering a broader range of qualified expenses including tutoring, curriculum materials, and educational therapy.⁹
• 529-to-Roth IRA rollover: Under SECURE 2.0, up to $35,000 over a lifetime can be rolled from a 529 plan to a Roth IRA for the same beneficiary, subject to annual Roth contribution limits, earned income requirements, and a 15-year account age requirement.¹⁰

SECURE Act 2.0: Key Provisions Now in Effect

The SECURE 2.0 Act of 2022 introduced dozens of changes to retirement savings rules. Here are the key provisions that may affect your planning:²

• RMD age increase: RMDs now begin at age 73 (or 75 for those born in 1960 or later).¹
• Roth 401(k) plan RMDs eliminated: Designated Roth accounts in employer plans no longer require lifetime distributions, effective 2024.⁶
• Reduced RMD penalty: The penalty for missed RMDs dropped from 50 percent to 25 percent, and to 10 percent if corrected in a timely manner.²
• Emergency withdrawals: Participants may withdraw up to $1,000 per year penalty-free from retirement accounts for unforeseeable personal or family emergencies.²
• Student loan matching: Employers can treat qualified student loan payments as elective deferrals for purposes of matching contributions.²
• Auto-enrollment: New 401(k) and 403(b) plans established after December 29, 2022 must auto-enroll eligible participants at a deferral rate between 3 and 10 percent.²
• Enhanced catch-up (ages 60–63): Additional catch-up room of $11,250, above the standard catch-up limit, for those between 60 and 63.⁴
• Part-time workers: Long-term part-time employees working 500 or more hours annually for at least two consecutive years are eligible for employer retirement plans.²

Choosing the Right Types of Savings Accounts for Retirement

There is no lack of alternatives for putting away funds for your future. Each account type has different rules regarding participation ages, contribution limits, investment options, and RMDs. Additionally, these rules can change with new legislation—as the recent SECURE 2.0 and OBBBA updates demonstrate.

Understanding your options is key to maximizing your retirement savings, both during your accumulation years and during retirement. Working with a financial advisor can help you navigate these complexities and tailor a strategy that meets your needs. Regularly review your plan to ensure it remains aligned with your goals and circumstances.

The advisors at OneDigital stand ready to help you determine ways to use the various accounts to help you maximize your future.

Connect with a OneDigital Investment Advisor to optimize your approach and safeguard your future.

Dive deeper into strategic tax planning in our comprehensive blog post: The Art of Tax Planning: Optimizing Your Investments for Lower Taxes.

 

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Sources

1. IRS, “Retirement Plan and IRA Required Minimum Distributions FAQs.” irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
2. SECURE 2.0 Act of 2022, Pub. L. No. 117-328, Division T of the Consolidated Appropriations Act, 2023.
3. IRS, “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500,” November 13, 2025. irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
4. IRS, “COLA increases for dollar limitations on benefits and contributions.” irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions
5. SECURE 2.0 Act of 2022, § 603; IRS, “Retirement topics – 401(k) and profit-sharing plan contribution limits.” irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
6. IRS, “Retirement Plan and IRA Required Minimum Distributions FAQs” (“Withdrawals from Roth IRAs and Designated Roth accounts are not required until after the death of the account owner.”); SECURE 2.0 Act § 325.
7. IRS Revenue Procedure 2025-19, 2026 HSA/HDHP cost-of-living adjustments. irs.gov/pub/irs-drop/rp-25-19.pdf
8. IRS, “Treasury, IRS provide guidance on new tax benefits for HSA participants under the One, Big, Beautiful Bill.” irs.gov/newsroom/treasury-irs-provide-guidance-on-new-tax-benefits-for-health-savings-account-participants-under-the-one-big-beautiful-bill; IRS Notice 2026-05.
9. One Big Beautiful Bill Act (OBBBA), H.R.1, 119th Congress (2025–2026), § 529 provisions. congress.gov/bill/119th-congress/house-bill/1
10. SECURE 2.0 Act of 2022, § 126 (529-to-Roth IRA rollover). https://www.finance.senate.gov/download/retirement-section-by-section-

Investment advice offered through OneDigital Investment Advisors LLC, an SEC-registered investment adviser and wholly-owned subsidiary of OneDigital. These materials are provided for informational and educational purposes only and do not constitute a recommendation to buy, sell, or hold any security, nor do they constitute legal, accounting, investment, or tax advice. The materials and the information provided are not designed or intended to be applicable to any person’s individual circumstances. These statements do not constitute an offer or solicitation in any jurisdiction. All included information and data are limited only to the inputs and other financial assumptions indicated.