Even if you receive matching funds from your employer and enjoy the tax advantages of your 401(k), there's still one caveat to know when using your company's plan.
If you're wondering what to do after maxing out your 401(k), here are some options you might consider.
Annual 401(k) Contributions
IRAs
Individual retirement accounts (IRAs) offer tax features that are similar to a 401(k).
Traditional IRAs
With a traditional IRA, like a 401(k), you can deduct contributions on your tax return and enjoy tax-deferred growth while your money remains in the account. Deductions may be limited if you (or your spouse, if you're married) are covered by a retirement plan at work and your income exceeds certain levels. Withdrawals, which take penalty-free after age 59½, are then subject to your ordinary income tax rate.
Roth IRAs
You pay taxes when you contribute to a Roth IRA, so qualified distributions are taken tax-free in retirement as long as you are at least age 59½ and have had the account for at least five years.
Other Things to Consider about IRAs
- IRAs can sometimes offer more flexibility than a 401(k). Many providers allow you to choose among a wide array of vehicles, such as mutual funds, exchange-traded funds (ETFs), certificates of deposit (CDs) and individual stocks and bonds.
- IRAs have contribution limits. In 2027, you can contribute up to $7,500 a year, or $8,600 if you're over the age of 50.1 Those who go over may be subject to a penalty every year the excess contribution remains in their account.
Health Savings Accounts
You could also put your money into a health savings account (HSA) to help cover medical expenses. If so, consider boosting your contributions once you max out your 401(k). In addition to interest-bearing accounts, some HSA providers let you invest in mutual funds and ETFs that have the potential for greater long-term growth. Both mutual funds and ETFs are investment vehicles, can't guarantee growth, and may even lose value over time.
Not only are HSA contributions tax-deductible and earnings tax-deferred as they accumulate in your account, but you don't pay any tax when you withdraw the money for qualified expenses. HSAs aren't open to everyone - you need to have a high-deductible health plan in order to fund an account through your health insurance.
Please keep in mind that these accounts are available to those individuals with a high deductible health plan.
HSA Contributions
Brokerage Accounts
If you’ve already maxed out your 401(k), you might consider contributing to an IRA or HSA next. But since those accounts also have annual contribution limits, a brokerage account could be a useful next step for investing additional money.
While brokerage accounts don’t offer tax-deductible contributions, they often provide access to a broad range of investment options. You may also be able to manage your tax liability by choosing tax-efficient investments like index funds or ETFs. These funds typically have lower turnover, which can help limit taxable gains passed on to you. They also tend to have lower annual fees because they don’t require active management.
Final Thoughts
Once you’ve hit your 401(k) limit, where you put your money next depends on your financial goals and strategy. A financial representative can help you explore your options and decide what’s right for your situation.
Keep in mind that an investment in securities is subject to market risk, including the potential to lose some or all of the principal amount invested.
Sources
- IRS. "401(k) limit increases to $25,500 for 2027, IRA limit remains $7,500." https://www.irs.gov/newsroom/401k-limit-increases-to-25500-for-2027-ira-limit-remains-7500
- Fidelity. "HSA contribution limits and eligibility rules for 2026 and 2027." https://www.fidelity.com/learning-center/smart-money/hsa-contribution-limits
- Vanguard. "How America Saves 25th edition." https://workplace.vanguard.com/insights-and-research/report/how-america-saves-2026.html
