If You’ve Already Maxed Out Your 401(k), Here Are the Next 7 Money Moves You Should Make

• There are many places to put your money after you’ve maxed out 401(k) contributions.

• You could take advantage of the triple tax advantages offered by HSA.

• You can continue investing for retirement in an IRA or switch to a taxable brokerage account.

• If you’re thinking about retiring or know someone who is, three quick questions make many Americans realize they may retire sooner than expected. take 5 minutes to learn more here

Maxing out a 401(k) can be a great way to build retirement wealth. This business account allows you to make pre-tax contributions to a retirement plan, and in many cases, your contributions also entitle you to matching funds from your employer.

However, even though most people know they should contribute to a 401(k), they don’t necessarily know what to do next. If you have a maxed out account at work and are trying to figure out what else to do with your money, here are some options to consider.

If you don’t already have an emergency fund in a high-yield savings account, this should be your top priority after making 401(k) contributions.

Your emergency fund should generally contain a minimum of three to six months of living expenses, although you may want to set aside even more for emergencies if you are the sole breadwinner in your household, if your job is not very stable, or if you have concerns about your health.

An emergency fund can save you from financial disaster when things go wrong. This money can help you avoid borrowing for unexpected costs, and if you’re laid off or sick, it can cover your mortgage, other bills, and medical expenses. You don’t want to have to withdraw money early from your 401(k) to pay for these things, so prioritize emergency preparedness as soon as possible.

If you have debt, you may want to pay it off as your primary financial goal once you take care of your 401(k) contributions. However, whether you need to pay it off sooner or not depends on the type of debt.

If you have high-interest credit card, medical debt, or personal loan debt, then you will need to seriously consider making additional payments to eliminate them. The ROI of paying off high-interest debt is good since you get a guaranteed return by avoiding months or years of costly interest.

If you have low-interest loans designed to be repaid over the long term – like student loans or a mortgage – then prepaying may not be for you. These types of debts may have low rates and the interest may even be tax deductible, depending on your income and tax status. It doesn’t make much sense to pay off this type of debt early when you could get a better return on your investment by investing in the stock market.

A 401(k) isn’t the only account you can use to make tax-advantaged contributions to a retirement plan. Depending on your income, you may also be eligible to invest money in a traditional or Roth IRA.

A traditional IRA offers similar tax benefits to a 401(k), but unfortunately, no employer matching contributions are available. The good thing is that you can open your IRA with any brokerage firm you want and you can also invest in almost anything you want. This provides much more flexibility than a 401(k), which typically limits you to a small pool of investments, including mutual funds or ETFs. With an IRA, you can invest in individual stocks if you want, or even other assets like gold or crypto with the right IRA provider.

A Roth IRA is another great choice, but its tax benefits work differently. You won’t take an upfront deduction, but instead invest with after-tax money and can make tax-free withdrawals in retirement. However, as with a traditional IRA, you have choices about where to keep your account and what to invest in.

Traditional and Roth IRAs have a combined annual contribution limit, which is much lower than the 401(k) contribution limit. However, as long as you don’t earn too much, you may want to take full advantage of the additional tax breaks offered by these accounts to help you create a more secure retirement.

If you have a qualifying high-deductible health plan, you also have another great account to invest in: a health savings account. HSAs may actually be one of the best accounts for investing in retirement, and it may be worth prioritizing these accounts even before maxing out your 401(k) once you’ve gotten it all from your employer.

HSAs are a fantastic account because you can contribute with pre-tax dollars, you can grow your money tax-free, and you can withdraw it tax-free for qualified medical expenses. This triple tax relief only exists with this account because 401(k) and IRA accounts force you to choose between saving on taxes upfront or when you make withdrawals. HSA allows you to save on both ends.

Tax-free withdrawals are available only for qualified medical expenses, which is not a major drawback since many retirees spend a lot of money on medical care. The good news is that if you happen to be healthy and don’t need expensive medical services, you can still benefit from an HSA because you’re allowed to withdraw money penalty-free after age 65. Distributions are simply taxed at your ordinary income tax rate, so the account is essentially treated like a 401(k).

Saving for other financial goals is another good thing to do with your money – depending on where you are in life. For example, you may want to save for a down payment if you haven’t yet purchased a home. If you want to avoid car loans in the future, you can save for a vehicle. You can even save up for a lavish vacation if travel is important to you.

The money you save for these other financial goals can be put into a high-yield savings account or certificate of deposit if you don’t need it for a few months or years. Alternatively, you may decide to save so your children can go to college, in which case you can open a 529 account and invest for their future.

Although the emphasis is on investing in accounts with tax breaks, you may also want to put some of your money in a taxable brokerage account.

These accounts don’t give you the option to deduct your contributions or benefit from tax-free withdrawals, but you can still invest and earn generous returns by putting your money in the market. Additionally, as long as you hold assets for at least one year, you will be subject to capital gains tax, rather than ordinary income tax, when you sell those assets. This is usually a lower tax rate, meaning there are still tax benefits to the investment.

One of the big advantages of taxable brokerage accounts is that you don’t have strict rules about when you can withdraw the money you have in them. If you’re considering early retirement, this will be important because you’ll be able to live off the interest in your taxable account while you wait to reach 59 1/2 to become eligible for penalty-free withdrawals from your 401(k) or IRA.

Finally, you can consider alternative investments like cryptocurrency, real estate, precious metals, or other assets outside of the stock market. Although alternative investments often involve more risk, in some cases they also offer greater potential for higher gains. A financial advisor can help you determine which, if any, alternative assets deserve a place in your portfolio.

All of these options are great, so consider working with an advisor to decide which one makes the most sense based on your current financial situation.

You may think retirement is about picking the best stocks or ETFs, but you’d be wrong. Even the largest investments can be a liability in retirement. It’s a simple difference between accumulating and distributing, and it makes all the difference.

The good news? After answering three quick questions, many Americans rework their portfolio and discover they can retire. earlier than expected. If you’re thinking about retiring or know someone who is, take 5 minutes to learn more here.