I’ve Maxed Out My 401(k) and IRA. Now What?

After maximizing contributions to traditional retirement accounts like 401(k)s and IRAs, individuals often seek further avenues for investment and financial growth. This indicates a strong foundation in retirement planning and an opportunity to explore additional wealth accumulation strategies. Beyond familiar tax-advantaged accounts, various options exist to continue building financial security and expand investment portfolios. Understanding these next steps can help optimize savings and align them with long-term financial objectives.

Leveraging Health Savings Accounts

Health Savings Accounts (HSAs) offer a unique opportunity for long-term savings, especially for those enrolled in a high-deductible health plan (HDHP). To qualify for an HSA, an individual must be covered by an HDHP and not be enrolled in Medicare or claimed as a dependent. For 2025, an HDHP must have a deductible of at least $1,650 for self-only coverage or $3,300 for family coverage, with out-of-pocket maximums not exceeding $8,300 for self-only coverage or $16,600 for family coverage.

HSAs are recognized for their “triple-tax advantage,” making them a powerful savings vehicle. Contributions are tax-deductible, reducing taxable income. The funds within an HSA grow tax-free, including interest, dividends, or capital appreciation. Withdrawals are entirely tax-free when used for qualified medical expenses.

These accounts function as investment vehicles, allowing funds to be invested in various options such as mutual funds, exchange-traded funds (ETFs), and stocks. For 2025, the annual contribution limits are $4,300 for self-only coverage and $8,550 for family coverage, with an additional $1,000 catch-up contribution permitted for those aged 55 and older. A strategic approach involves paying for current medical expenses out-of-pocket, if financially feasible, to allow HSA funds to remain invested and grow untouched for future healthcare costs in retirement.

Investing Through Taxable Brokerage Accounts

Once tax-advantaged retirement accounts are fully utilized, a taxable brokerage account becomes a primary option for further investment. This type of account uses after-tax dollars to purchase a wide array of securities, including stocks, bonds, mutual funds, and exchange-traded funds. Unlike 401(k)s or IRAs, taxable brokerage accounts do not have specific contribution limits, income phase-out restrictions, or rigid withdrawal rules, offering significant flexibility.

Various types of taxable brokerage accounts exist, such as individual accounts, joint accounts, or trust accounts. An individual account is owned by a single person, while a joint account is shared by two or more individuals. Trust accounts are held by a trust, providing specific estate planning benefits.

Investments held within these accounts are subject to taxation on earnings, including interest, dividends, and capital gains. Short-term capital gains, realized from selling an asset held for one year or less, are typically taxed at an individual’s ordinary income tax rate. Long-term capital gains, from assets held for more than one year, generally receive preferential tax rates. Dividends are also taxed, either as ordinary income for non-qualified dividends or at the lower long-term capital gains rates for qualified dividends.

To manage tax liabilities within these accounts, investors can employ strategies such as tax-loss harvesting. This involves selling investments at a loss to offset capital gains and potentially a limited amount of ordinary income. While taxable accounts do not offer the same upfront tax benefits as retirement accounts, their flexibility and lack of contribution limits make them a valuable tool for accumulating additional wealth beyond traditional retirement savings.

Exploring Other Investment Opportunities

Beyond traditional brokerage accounts, several other investment avenues can diversify a portfolio and generate returns. These options cater to different risk appetites and financial objectives, providing additional pathways for growth once conventional accounts are maximized.

Real Estate

Direct real estate investment, such as purchasing rental properties, offers potential for both income generation through rent and capital appreciation. Property owners can also benefit from various tax deductions, including mortgage interest, property taxes, repairs, and depreciation. Alternatively, Real Estate Investment Trusts (REITs) provide an indirect way to invest in real estate by purchasing shares in companies that own or finance income-producing properties. REITs typically distribute a significant portion of their taxable income as dividends.

Annuities

Annuities are contracts with insurance companies designed to provide a future income stream, often during retirement. They come in various forms:
Fixed annuities offer a guaranteed interest rate and predictable payments.
Variable annuities fluctuate based on underlying investment performance.
Indexed annuities link returns to a market index.
Annuities can be immediate, starting payments soon after purchase, or deferred, allowing funds to grow before payments begin.

Strategic Debt Reduction

Strategic debt reduction can also be viewed as an investment, particularly for high-interest obligations like credit card debt or personal loans. Paying down debt saves interest payments. This approach frees up cash flow, which can then be redirected toward other investment opportunities, enhancing overall financial health.

Advanced Retirement Contribution Strategies

For high-income earners who have already maximized standard retirement contributions, advanced strategies exist to further enhance tax-advantaged savings.

Mega Backdoor Roth

The “Mega Backdoor Roth” involves contributing after-tax money to a 401(k) plan and then converting those funds into a Roth IRA or Roth 401(k). This allows individuals to bypass income limitations associated with direct Roth IRA contributions. After-tax 401(k) contributions count towards the overall annual defined contribution limit, which for 2025 is $70,000, or $77,500 for those aged 50 and over. This strategy requires the employer’s 401(k) plan to allow after-tax contributions and in-service distributions or conversions to a Roth account.

Non-Qualified Deferred Compensation (NQDC) Plans

NQDC plans are typically offered by employers to highly compensated employees. These plans allow employees to defer a portion of their current income, delaying taxation until a future date. Unlike qualified plans like 401(k)s, NQDC plans are not subject to the same Employee Retirement Income Security Act (ERISA) rules, offering greater flexibility. There are generally no IRS limits on contributions to NQDC plans, providing a significant avenue for high earners to defer substantial income.