When we think about saving for retirement, many of us may be inclined to put all of our money into a single account. And that's not necessarily a terrible thing.
Let's imagine you open a single retirement account, but you invest your money across a range of assets. As long as you're well diversified, you may be setting yourself up to retire comfortably. Plus, sticking to just one account could make your wealth easier to track.
But it could also very much pay to spread your retirement savings across a few different accounts. Here are three in particular that you may want to use in conjunction with one another.
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1. A Roth IRA
The nice thing about Roth IRAs is that they give you plenty of flexibility with your money. Don't want to take withdrawals in retirement? No problem. Unlike traditional retirement plans, Roth IRAs don't impose required minimum distributions.
Plus, with a Roth IRA, you get to enjoy the benefit of tax-free gains while you're building savings, and then tax-free withdrawals in retirement once you decide you are looking to tap that account.
2. A taxable brokerage account
Some people struggle to retire on time, but if you save enough money, you may end up in a position to retire early. That's why it pays to save for your future in a taxable brokerage account on top of a tax-advantaged one. This way, you won't be limited in how much you can contribute each year. Plus, you'll have the flexibility to take withdrawals whenever you please without having to worry about penalties.
3. An HSA
A health savings account (HSA) is a terrific savings account from a tax perspective. Contributions go in tax-free, investment gains are tax-free, and withdrawals are tax-free when used to pay for qualified medical expenses.
The nice thing about having money in an HSA is that you have separate funds available to cover healthcare costs. Those could be more expensive than expected once you move over to Medicare (and not just because of Medicare itself, but also, your age may mean you need more healthcare).
A winning combination
You could opt to save for retirement in a single account. But the combination of these three in particular gives you a lot of benefits. You get a good number of tax breaks, a fair amount of flexibility, and some separation of your money, so to speak, so that you're not leaving yourself short on funds for healthcare spending.
Now, that said, Roth IRAs and HSAs do have eligibility requirements. With the former, there are income limits, and with the latter, your health plan needs to have a certain minimum deductible and out-of-pocket maximum that changes from year to year.
Anyone can save in a taxable brokerage account, though. So if you're not able to fund a Roth IRA or HSA, you may want to sit down with a financial advisor and come up with your own combination of accounts that makes it possible to enjoy the comfortable retirement lifestyle you deserve -- on a timeline that works well for you.
