When it comes to securing your financial future, the magic number to remember is 20%. Placing at least 20% of your income into a mix of 401(k), Roth IRA, and taxable brokerage accounts can significantly bolster your savings strategy, providing a well-rounded approach to wealth accumulation and retirement planning. Think of it as a diversified recipe for financial success, with each type of account adding its unique flavor and benefits to your portfolio.

Starting with your 401(k), this account is often the cornerstone of retirement savings, especially if your employer offers a matching contribution. Contributing a portion of your income pre-tax allows you to lower your taxable income, which can be a major plus come tax time. Additionally, the employer match is essentially free money, a benefit you don’t want to leave on the table. Over time, the tax-deferred growth of a 401(k) can compound significantly, helping you build a sizable nest egg.

Next, the Roth IRA is the superstar of tax-advantaged accounts, offering tax-free growth and tax-free withdrawals in retirement. Since contributions are made with after-tax dollars, you won’t get an immediate tax break, but the long-term benefits are substantial. The Roth IRA is also flexible; you can withdraw your contributions (not earnings) without penalty, making it a great option for unexpected expenses. By allocating a portion of your 20% into a Roth IRA, you’re effectively hedging against future tax hikes and ensuring you have tax-free income in retirement.

Lastly, a taxable brokerage account adds a layer of flexibility and accessibility to your financial strategy. Unlike retirement accounts, there are no contribution limits or early withdrawal penalties, giving you the freedom to invest and access your money as needed. This account type is perfect for medium to long-term goals and allows you to take advantage of a wide array of investment options, from stocks and bonds to mutual funds and ETFs. By placing a portion of your income into a taxable brokerage account, you maintain liquidity and the ability to capitalize on market opportunities.

In summary, dedicating at least 20% of your income to a combination of 401(k), Roth IRA, and taxable brokerage accounts creates a robust and diversified investment strategy. This approach not only maximizes tax advantages and employer benefits but also ensures flexibility and accessibility to your funds. By consistently investing in these accounts, you’re setting yourself up for a secure and prosperous financial future.