This article provides a rank ordering of the most tax-efficient financial moves an employee should make when beginning a career. Ideally, the first two moves should be made together: put the maximum into a health savings account if the employee has high-deductible health insurance and put enough into a 401(k) account to obtain the maximum employer match. The next step is to pay down and ultimately pay off all high-interest-rate debts. The fourth step is to contribute to a Roth IRA annually since the contributions can be used for emergency spending needs tax free.
Author: Greg Geisler, PhD, CPA, is a clinical professor of accounting at Indiana University. He teaches a course on tax and individual financial planning. His research interest is how taxes impact financial advice. He has published four previous articles in Journal of Financial Service Professionals and six articles in Journal of Financial Planning. Greg holds a PhD from the University of North Carolina at Chapel Hill, an MBA from University of Pittsburgh, and a bachelor’s degree from University of Notre Dame.
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