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US Investing Accounts Explained

A plain-language guide to 401(k), Traditional IRA, Roth IRA, HSA, and taxable brokerage accounts — contribution limits, tax treatment, and how Luum tracks each.

3 min read

The US retirement and savings account system offers several tax-advantaged vehicles, each suited to different goals. This article explains the major account types and how Luum treats each one.

Educational only. Contribution limits are adjusted annually by the IRS. Always verify current limits on irs.gov or with a qualified tax advisor.

401(k) — Employer-Sponsored Retirement Plan

A 401(k) is offered by employers and funded through pre-tax payroll deductions (traditional) or after-tax contributions (Roth 401(k)). Investments grow tax-deferred, and many employers match a percentage of contributions — effectively free money.

  • 2024 employee contribution limit: $23,000 ($30,500 if age 50 or older with catch-up contributions).
  • Employer match: Does not count against your personal limit.
  • Traditional 401(k): Contributions reduce taxable income now; withdrawals in retirement are taxed as ordinary income.
  • Roth 401(k): Contributions are after-tax; qualified withdrawals in retirement are completely tax-free.
  • RMDs: Required minimum distributions start at age 73 for traditional 401(k). Roth 401(k) RMDs were eliminated starting 2024.
  • Early withdrawal: Withdrawals before age 59½ incur a 10% penalty plus income tax (with certain exceptions).

In Luum: 401(k) accounts (both traditional and Roth) are displayed in your portfolio and net worth. The balance is treated as a tax-deferred asset. Gains inside a 401(k) are excluded from your Tax Centre capital gains report.

Traditional IRA

An Individual Retirement Account (IRA) is opened independently of an employer. Traditional IRA contributions may be tax-deductible depending on your income and whether you have a workplace retirement plan.

  • 2024 contribution limit: $7,000 ($8,000 if age 50 or older).
  • Deductibility: Fully deductible if you have no workplace plan. Phase-outs apply if you or a spouse has a workplace plan and income exceeds IRS thresholds.
  • Withdrawals: Taxed as ordinary income. A 10% early withdrawal penalty applies before age 59½ (with exceptions).
  • RMDs: Required minimum distributions start at age 73.

In Luum: Traditional IRA accounts are tracked and displayed in your portfolio. Gains are excluded from the capital gains report.

Roth IRA

A Roth IRA is funded with after-tax dollars. The trade-off: no deduction now, but all qualified withdrawals in retirement are completely tax-free — including decades of investment growth.

  • 2024 contribution limit: $7,000 ($8,000 if age 50 or older) — shared with the Traditional IRA limit.
  • Income limits: Ability to contribute phases out at higher incomes ($146,000–$161,000 for single filers in 2024).
  • Qualified withdrawals: Tax-free after age 59½ and with the account open for at least 5 years.
  • Contributions (not earnings) can be withdrawn at any time without tax or penalty.
  • **No RMDs:**Roth IRAs have no required minimum distributions during the owner's lifetime.

In Luum: Roth IRA accounts are displayed and tracked. Because withdrawals are tax-free, gains inside a Roth IRA are excluded from your capital gains report.

HSA — Health Savings Account

The HSA is uniquely triple tax-advantaged: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. After age 65, withdrawals for any purpose are taxed as ordinary income (similar to a traditional IRA), making the HSA a powerful supplemental retirement account.

  • Eligibility: Must be enrolled in a High-Deductible Health Plan (HDHP).
  • 2024 contribution limit: $4,150 (self-only) or $8,300 (family). $1,000 catch-up if age 55 or older.
  • Rollover: Unlike FSAs, unused HSA funds roll over indefinitely.
  • Investment: Once your balance exceeds a threshold set by your HSA provider, funds can be invested in a portfolio of stocks and funds.

In Luum: HSA accounts connected through Snaptrade are displayed and included in net worth. The invested portion is tracked alongside your other holdings.

Taxable brokerage account

A standard (non-registered) brokerage account has no contribution limits and no restrictions on withdrawals, but offers no special tax treatment. Capital gains, dividends, and interest are taxed in the year they are realised or received.

In Luum: Taxable accounts are where ACB tracking and capital gains reporting are most relevant. Gains and losses in taxable accounts appear in your 1099-B export from the Tax Centre.

For Canadian account types, see Canadian Registered Accounts Explained →

This article is educational and general in nature. It is not investment, tax, or legal advice, and it does not take your own circumstances into account. Verify tax treatment with the CRA or a qualified tax professional.