Jan 28, 2017
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Simple Saving and Investing Plan that works for Everyone

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1. What are you goals?  For example, wealth accumulation, saving up for X, financial independence, retirement funds, college education, etc.

2. What is your strategy to save more, spend less?

3. What is your desired Asset Allocation?

4. If you have a spouse and/or kids

  • Make sure you “get your shit together” – as you open these various accounts, set and keep your beneficiaries updated.
  • Consider Term Life Insurance

Priority Order

Now that the basics are taken care of, this is a basic prioritization of things that might be helpful in accumulating wealth over the long term.

1. Free money

  • Contribute to 401k (Roth or pre-tax) up to your company match.  Be careful not to contribute over the 18k limit.
  • Max out your company’s ESPP.  (See ESPP Basics)

2. Emergency Fund (See Emergency Fund FAQ)

3. Saving and investing in tax-advantaged accounts (See this explanatory diagram)

  • Max your HSA ((it’s tax-free going in, growth and tax-free coming out when used on qualified medical expenses). Try to pay medical expenses out of your own bank account to maximize growth. Pay medical expenses out of pocket if you can.
  • Max IRA or Roth IRA up to $5,500 limit (and add another $5,500 if you have a spouse). Even if your income is over the limits you can use the Backdoor conversion.
  • Max after-tax 401k up to the 20,000 limit and convert to Roth (either within the plan [to the Roth 401k] or to a separate Roth IRA). Conversions can be done each pay period.
  • I Bonds allow you to defer income tax on the interest for up to 30 years

4. If you are over 50

  • Catch-up contributions in your 401k up to the $5,000 limit
  • Catch-up contributions in your IRA up to the $1,000 limit

5. If you (or your spouse) own(s) your (their) own business, there is an entire world of options available – see tax advantages in Own your business

6. Donating to charity? Use a Donor Advised Fund like Fidelity Charitable to transfer appreciated stocks. Potentially huge tax advantage over donating cash.

7. 529 Plan, if you have kids and plan to pay for their school.

8. Saving your own money in non-tax advantaged accounts, e.g. a Brokerage

9. Tax gain harvesting for kids (details here)



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Stephen Byars

    Stephen C. Byars, senior editor of https://Investor.blog, author of "Investing 101"

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