How to Build Wealth with the 3 Bucket Strategy (By Age)

Brian and Bo from the Money Guy Show explain a three-bucket strategy for building wealth across life stages, integrated into their Financial Order of Operations (FOO). The buckets are tax-free (Roth IRA, Roth 401(k), HSA), tax-deferred (pre-tax 401(k), traditional IRA), and after-tax (brokerage accounts). They illustrate with "Manny the financial mutant," who starts at age 25 earning $50,000 (with 5% annual raises), saves 25% of gross income, captures his employer's 3% match on 6% contributions, prioritizes Roth until his combined marginal tax rate exceeds 30%, and uses backdoor Roth when needed. Returns decline gradually from 9.5% at 25 to 5.5% at retirement, assuming no high-interest debt or emergency fund gaps.

20s: Load the Tax-Free Bucket First

In the 20s, focus most savings on tax-free growth, as early dollars compound longest. After securing the employer match (often pre-tax), prioritize Roth IRA contributions—even if not maxed—then Roth 401(k) and HSA if on a high-deductible health plan. Roths offer tax-free growth and withdrawals, low-fee index funds, investment flexibility, and access to contributions penalty-free if needed. HSAs provide a triple tax advantage (deductible contributions, tax-deferred growth, tax-free medical withdrawals) plus potential payroll tax savings.