Top Ten Places to Save Your Money
You can do better than your bank account
Besides fewer carbs and more steps, many of us resolve to do less spending and more saving. If that includes you, here’s my updated list of the top 10 (OK, maybe 11) places to save your money. And, as a bonus, I include 6 more from which I’d stay far away.
Best Places to Save
1. HSA
Nothing beats a health savings account. This tax-sheltered savings is only available if you have a qualifying high deductible health plan. If you’re eligible, it’s the best deal around as it’s a trifecta of tax-deductible contributions, tax-free growth, and tax-free distributions. Some employers make it a quadrifecta with a match to incent you to opt for this plan and that’s just more tax-free free money.
If you have other savings, don’t use the funds when you have medical expenses — keep them growing tax-free and use them far in the future for your older self. Learn more here:
2. ESPP
If you work for a public company that offers an employee stock purchase plan, maximize payroll deductions to it. Immediately auto-sell your shares each period and, in most plans, you’ll lock in a minimum gain of 17+%. Yes, it’s taxable but that’s still hard to beat.
Better Places to Save
3. Your employer’s 401K
Not all 401K plans are great in terms of investment options and fees but you can contribute through payroll deductions which is a big advantage. Also, many employers offer a match and that’s free money you can’t pass up. At a minimum, capture 100% of your employer’s match.
If you’re self-employed, you can contribute to a SEP-IRA.
4. Roth IRA
It’s never a bad idea to fund a Roth IRA. You can still contribute even if you have a 401K at work or a SEP-IRA. However, Roth IRAs have an income limitation so if your adjusted gross income is too high, you’re ineligible.
5. Back-door Roth IRA
This one’s a bit complicated so search the google tubes for the details but briefly, for those whose income is too high to be eligible to contribute to a Roth IRA, you can make non-deductible contributions to a traditional IRA and then convert the funds to a Roth without owing tax on the conversion. It doesn’t work if you have an existing traditional IRA balance for reasons I won’t explain here.
6. Mega back-door Roth 401K
A little-known feature of some 401K plans is allowing participants to make additional after-tax contributions, up to a total of $70,000 per year as of 2025 (even higher if you’re over age 50). You receive no tax deduction but these additional contributions can be rolled into a Roth 401K right away.
If you’re a high income earner and have maxed out contributions to your 401K, this is like a super-charged, back-door Roth IRA contribution. However, 401K plans often do not offer this option.
Editor’s note: Learn more about 4, 5, and 6 here:
7. 529 plan
If you have children, grandkids, or other relatives and want to contribute to their college education, a 529 is the best way to do so. It’s similar to a Roth IRA — the investment income accrues tax-free and you’ll pay no tax when you withdraw the funds for qualifying educational expenses.
8. MYGAs
A Multi-Year Guaranteed Annuity is the insurance industry’s version of a bank CD. You hand over your money to an insurance company for a specified term (usually 3 years or more) and they return your money, plus the interest at the end of the term, or roll it over into a new annuity. Generally, it’s a higher rate than a bank CD (though not FDIC guaranteed) and has better tax treatment as you defer the interest income until you redeem them.
Good Places to Save
9. Pay off loans
It’s never a bad time to pay off your loans. Start with the loan with the highest rate and work your way down. However, it sometimes makes good psychological sense to first pay off a loan with the smallest balance, just for the psychic satisfaction and sense of progress. Either strategy is a winner.
10. Invest in a taxable account
If the first 9 aren’t suitable for you, invest in a taxable account. A low-cost stock index fund may be the most tax- and cost-effective way to get started with your investing self-education.
11. Give some money away
OK, this isn’t saving but if you’re thinking about donating some money to charity, a “donor-advised fund” may be the best way to do so. You donate the money to a fund you control and you can later designate the organizations to which the money is distributed. You’ll want to do this in a year when your income is high as you’ll get a tax deduction when you initially make the contributions to the fund. And, you can also donate appreciated securities and avoid any capital gains tax.
Bad Places to Save
Avoid these 6 “investments:”
1. Variable annuities
They’re complex and too expensive to offer any real benefit. I’ve worked with a lot of clients who previously were sold these and I’ve yet to meet one who (a) knew why they bought it, (b) understood what they owned, or (c) knew what their options were. Stay away.
However, a single-premium income annuity is a different animal and may make good sense in retirement.
2. Whole life insurance
It’s a confusing bundle of term life insurance and forced savings. Like many bundles, it combines something you need with something you don’t want. Buy the term life insurance you need and save your money in one of the better ways I mentioned above.
3. Bitcoin and anything else crypto-sounding
It’s never a good idea to invest in something you don’t understand as it usually leads to the intersection of heartache and regret.
4. Metals
There’s also no clear intuition for why precious metals should appreciate over time beyond their industrial value, especially compared to other investments such as stocks, bonds, and commercial real estate. Instead of receiving interest or dividends, you’re paying for storage, insurance, shipping, and other transaction costs.
5. Your brother-in-law’s latest no-lose investment scheme
You may end up on another road to heartache and regret. Investing in the family business is rarely a good financial move.
But, if you must, limit these “non-traditional” investments to less than 5% of your overall net worth.
6. Lottery tickets, sports betting, and other gambling
Save these for your entertainment budget; but, if you must, go to the casino where the odds may be better and the drinks may be free.
There’s no time like the present to save more.
love this! thank you!