Maxed Out Your 401(k) Match? Here’s How to Prioritize Your Next Retirement Moves

After contributing enough to get your full 401(k) employer match, the next question is where to invest your additional savings. Christine Benz of Morningstar outlines a smart “retirement savings hierarchy” that helps investors decide which accounts to fund next. Her framework, similar in spirit to Reddit’s well-known Personal Finance Flowchart, provides a clear, step-by-step guide for optimizing your long-term retirement strategy.

You’ve maxed your company 401(k) match. Now what? Where exactly should you direct your savings? Christine Benz has a short but useful Morningstar article called A Hierarchy for Retirement Savings. The structure reminds me a bit of the Personal Finance Flowchart from Reddit.

The best part of the article is that they explain the exceptions, or at least reasons for de-prioritization, in a clear and concise manner. These exceptions may be uncommon, but they are important to know. I recommend reading the entire article, but here are some quick notes.

• 401(k) up to the match. Exception: You may not have a match.
• IRA up to the limit (plus Spousal IRA). Exception: Your 401(k) may be so awesome it’s good enough. 401ks also have better asset protection.
• 401(k) up to the “normal” limit. Exception: In some limited cases near retirement, the benefits don’t outweigh the restrictions.
• Health Savings Account (HSA) up to the limit. Exception: You may not be eligible for an HSA.
• Additional after-tax 401(k) contributions to the “full” deductible limit, if allowed. (AKA “Mega Backdoor Roth”). Exception: Your plan may not offer additional after-tax contributions (only about 1/4 do), or your plan is otherwise extra bad.
• Taxable brokerage account. The default if nothing else is better.

Photo by Jon Tyson on Unsplash