Mon May 27 2024, by Tyler Gardner

5 Essential Accounts for Women in Their 20s to Achieve Financial Independence

If you're a woman in your 20s and you want to stop depending on that nine-to-five job so much, you need to make sure you have access to the following five types of accounts today.

1. Emergency Fund

First, establish an emergency fund with three to six months’ worth of expenses. Right now, this could be in a high-yield savings account earning 3% to 4%.

2. Investment or Brokerage Account

Second, open an investment or brokerage account through Fidelity, Schwab, or Vanguard. While this is a taxable account, using it to invest can typically help you keep pace with inflation.

3. Roth IRA

Third, set up a Roth IRA. This is a retirement account funded with post-tax dollars, and the advantage is that in 20 to 30 years, after compound growth, you won’t have to pay capital gains tax on the withdrawals.

4. Pre-Tax Retirement Account

The fourth account should be a pre-tax 401(k) or a traditional IRA. These retirement accounts allow you to take some money off the table from the government this tax year, as you can deduct $22,500 from a 401(k) and $6,500 from an IRA.

5. Health Savings Account (HSA)

Finally, consider a Health Savings Account (HSA). Contributions are tax-deductible, you can invest that money for growth, and as long as it’s used for qualified medical expenses, distributions are tax-free. Plus, the funds roll over from one year to the next, allowing it to grow continuously.

If you don’t have these five accounts, you need to set them up today for a strong financial future!

Source