I Maxed Out My 401(k). Now What?

If you've maxed out your 401(k) this year, congratulations, and that puts you ahead of the vast majority of savers. But this is a question I get constantly: "I maxed out my 401(k). What should I do with the rest?"

A lot of people let their extra savings just sit in a bank account, which is probably the least efficient way to handle it. Here's the order I'd think through instead.

This is a great problem to have, but it still deserves a strategy, not guesswork.

First, a Quick Gut Check

If you're maxing out your 401(k) but somehow haven't captured your full employer match, take care of that first. That's an immediate, guaranteed return before you look anywhere else. Most people reading this have already got that covered, but it's always worth double-checking.

Next Stop: The HSA (Often Overlooked)

If you have a high-deductible health plan, the HSA is usually my next stop, and it's frequently overlooked. It's the only account with a true triple tax advantage:

• Contributions go in pre-tax
• Growth is tax-free
• Withdrawals for qualified medical expenses are tax-free

Here's the part most people miss: after age 65, you can withdraw HSA funds for any purpose, without penalty. You'll pay ordinary income tax on that withdrawal, just like an IRA, but that makes the HSA function like a second retirement account, provided you can afford to leave it alone and pay for medical expenses out of pocket in the meantime.

The Roth IRA: Likely Through the Back Door

Next, I'd look at the Roth IRA. For most people maxing out their 401(k), income is typically above the direct Roth IRA contribution limits. If that's you, it's worth looking into the backdoor Roth IRA strategy, a completely legal way to get money into a Roth even above the income limits. I've covered exactly how that works in a separate video if you want the full breakdown.

The Mega Backdoor Roth: If Your Plan Allows It

Most people don't know this exists, but some 401(k) plans allow you to add after-tax dollars beyond the standard contribution limit, which can then be converted into Roth. If your plan allows both these after-tax contributions and in-service conversions, this is a great way to funnel significantly more money into the tax-free bucket.

Full disclaimer: this isn't available in every plan. You'll need to check with your HR department or your plan documents to confirm. But if it's on the table, it's one of the most powerful tools available to high-income earners.

The Taxable Brokerage Account

After all of that, a standard taxable brokerage account is where most additional savings ends up, and that's completely fine. You don't get a tax deduction going in, but you get real flexibility: no income restrictions, no contribution limits, and no early withdrawal penalty. You can access this money at any time, for any reason.

This account also plays an important role if you want to retire before age 59½, since it can bridge the gap, since your retirement accounts aren't accessible penalty-free until then.

A Few Other Buckets Worth Considering

Depending on your situation, a few other options may belong in the mix:

• A 529 plan, if you're saving for a child's education
• Paying down your mortgage early
• Simply building a larger cash cushion

There's no single right answer here; it depends on your goals and your timeline.

The Bottom Line

Being maxed out is a great position to be in, but that doesn't mean you shouldn't have a strategy for where your next dollar goes. 

*This blog is for educational purposes only and is not intended as individualized investment, tax, or legal advice. Consult with a qualified professional regarding your specific situation.