Tax-advantaged accounts are the bedrock of the FIRE portfolio. They are designed by the government to encourage retirement saving, and for the early retiree, they offer a way to "hack" the system by front-loading savings while in a high tax bracket and withdrawing them later when in a lower (or zero) tax bracket.

401(k) and 403(b): The Workplace Powerhouses

The 401(k) (for private employees) and 403(b) (for non-profit/government employees) are the most common vehicles for wealth accumulation. Their primary advantage is the high contribution limit and the potential for an employer match.

Contribution Limits and Catch-ups

For 2025 and 2026, the IRS has significantly increased the amounts you can squirrel away. In 2026, the maximum contribution for an individual is $24,500 . If you are age 50 or older, you can add a "catch-up" contribution of $8,000, bringing your total to $32,500 . For those aged 60 to 63, a special catch-up limit of $11,250 applies in 2026 .

The Traditional vs. Roth Decision

Most modern workplace plans offer both a Traditional and a Roth option.

Traditional 401(k): Contributions are made pre-tax. If you earn $100,000 and contribute $20,000, the IRS only taxes you as if you earned $80,000. This is the preferred choice for most FIRE seekers because it lowers their current tax bill, allowing them to save more of their paycheck.
Roth 401(k): Contributions are made with after-tax dollars. You get no tax break today, but the entire balance—including all growth—is tax-free when you withdraw it. This is often better for those currently in a very low tax bracket who expect to be in a higher one later.

Individual Retirement Accounts (IRAs): Personal Flexibility

While a 401(k) is tied to your employer, an IRA is an account you open yourself at a brokerage like Vanguard or Fidelity .

IRA Contribution Limits

For 2026, the annual contribution limit for IRAs is $7,500 . If you are 50 or older, you can contribute an additional $1,100 . It is important to note that your ability to deduct Traditional IRA contributions from your taxes depends on your income and whether you have a retirement plan at work.

2026 Traditional IRA Deduction Limits (If Covered by a Work Plan):

Filing Status	MAGI	Deduction Limit
Single	≤ $81,000	Full deduction
Single	$81,001 - $90,999	Partial deduction
Single	≥ $91,000	No deduction
Married (Joint)	≤ $129,000	Full deduction
Married (Joint)	$129,001 - $148,999	Partial deduction
Married (Joint)	≥ $149,000	No deduction

Health Savings Account (HSA): The Stealth IRA

The HSA is often called the "ultimate" FIRE account. To qualify, you must have a High Deductible Health Plan (HDHP). The HSA offers a triple tax advantage:

Tax-Deductible Contributions: Reduces your taxable income today.
Tax-Free Growth: No taxes on interest or investment gains.
Tax-Free Withdrawals: No taxes if used for qualified medical expenses.

For FIRE practitioners, the "pro move" is to pay for current medical expenses out-of-pocket, keep the receipts, and let the HSA money stay invested in low-cost index funds for decades. You can reimburse yourself for those old receipts at any time in the future, effectively turning the HSA into a tax-free ATM in retirement.

2026 HSA Contribution Limits:

Individual: $4,400
Family: $8,750
Catch-up (Age 55+): $1,000

Case Study: The Power of Maxing Out

Consider "Sarah," a 30-year-old software engineer earning $120,000. By maxing out her 401(k) ($24,500) and her HSA ($4,400), she reduces her taxable income to $91,100. This move alone could save her over $6,000 in federal income taxes annually. If she invests that $6,000 tax savings into a Roth IRA, she is effectively using the government's money to fund her early retirement.

Frequently Asked Questions (FAQs)

Can I contribute to both a 401(k) and an IRA? Yes, as long as you have earned income. However, your ability to deduct the IRA contribution may be limited by your income .
What happens if I leave my job? You can "roll over" your 401(k) into an IRA. This gives you more control over your investment choices and often lower fees.
Is the HSA really better than a 401(k)? Many FIRE experts argue yes, because of the triple tax advantage. However, you should always get your employer 401(k) match first, as that is a 100% return.