How to Legally Shelter 66% of Your Income

Added: 2026-05-18

[00:00:00]Here is a quick way to shelter 66% of your income legally. Number one, let's say I make $75,000 a year pre-tax.

[00:00:06]Number two, I would start by putting 4,150 bucks in a health savings account, above the line deduction. Number three, next I'd put $7,000 into a traditional IRA, above the line deduction, and we're rolling. Number four, next I'd put $23,000 into my traditional 401k, pre-tax contribution.

[00:00:22]>> This is good advice if tax rates go down in the future. If you're a high net worth individual, slow down before doing all this. Putting money in a regular 401k means less taxes now, that's true.

[00:00:31]But for every dollar that goes in right now, has to come out someday, and it all gets taxed at that time. At age 73, the government makes you take money out every single year. This is called RMDs, or required minimum distributions. You have to take it out even if you don't need it. That adds to your taxes every year for the rest of your life. If you're concerned about future tax rates, the Roth 401k might be a much better option for you. It's the same amount that can go into that account, and it doesn't save you taxes right now, but you never had to pay taxes on that money ever at age 73, the government makes you take money out every single year. This is called RMDs, or required minimum distributions. You have to take it out even if you don't need it. That adds to your taxes every year for the rest of your life. If you're concerned about future tax rates, the Roth 401k might be a much better option for you. It's the same amount that can go into that account, and it doesn't save you taxes right now, but you never had to pay taxes on that money ever again.