Where to Invest After Maxing Out Your Roth IRA

Maxing out your Roth IRA contributions is a significant financial milestone. As you continue your wealth accumulation journey, understanding where to invest next is important. This article explores additional investment avenues available once Roth IRA limits are reached, focusing on various account types and asset classes to support your continued financial growth and diversification.

Expanding Your Retirement Savings with Other Accounts

After fully funding your Roth IRA, several other tax-advantaged retirement accounts offer avenues for further savings. These accounts provide distinct benefits that can help accelerate wealth accumulation through tax deferral or tax-free growth, depending on their structure.

Employer-sponsored plans, such as 401(k)s, 403(b)s, and 457 plans, are often the primary next option. Contributions are typically pre-tax, reducing your taxable income in the year you contribute. Investments grow tax-deferred, with taxes due upon withdrawal in retirement. These plans frequently offer employer matching contributions, which should be prioritized whenever available.

For 2025, the employee contribution limit for 401(k), 403(b), and governmental 457 plans is $23,500. Individuals aged 50 and over can contribute an additional $7,500 in catch-up contributions. The total contributions from both employee and employer to these defined contribution plans cannot exceed $70,000 in 2025. Some plans also offer a Roth 401(k) option, allowing for after-tax contributions and qualified tax-free withdrawals in retirement, similar to a Roth IRA but with higher contribution limits.

Health Savings Accounts (HSAs) present another compelling option. Contributions are tax-deductible, funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP). For 2025, an HDHP requires a deductible of at least $1,650 for self-only coverage or $3,300 for family coverage. Annual out-of-pocket maximums for HDHPs cannot exceed $8,300 for self-only coverage or $16,600 for family coverage.

The contribution limits for HSAs are $4,300 for self-only coverage and $8,550 for family coverage in 2025. Individuals aged 55 and older can contribute an additional $1,000 catch-up contribution. While primarily for healthcare, HSAs can function as a retirement savings vehicle. Unused funds roll over year to year and can be invested. If not used for medical expenses, withdrawals in retirement are taxed as ordinary income.

A Traditional IRA can also serve as a continued investment vehicle, particularly if your income exceeds the limits for tax-deductible contributions. While contributions may not be deductible, earnings within the account grow tax-deferred. The annual contribution limit for a Traditional IRA is $7,000 for 2025. If you are age 50 or older, you can contribute an additional $1,000.

Investing Through Taxable Accounts

Once you have maximized contributions to all available tax-advantaged retirement and health savings accounts, a standard brokerage account becomes a primary option. Unlike specialized accounts, taxable brokerage accounts do not offer immediate tax deductions for contributions or tax-deferred growth. Investment gains and income are subject to taxation in the year they are realized.

Capital gains, which are profits from selling an investment for more than its purchase price, are taxed differently based on the holding period. Short-term capital gains, from assets held for one year or less, are taxed at your ordinary income tax rates. Long-term capital gains, from assets held for more than one year, qualify for preferential tax rates.

Dividends, which are distributions of a company’s earnings to its shareholders, also have varied tax treatments. Qualified dividends, typically from domestic or qualified foreign corporations, are taxed at the lower long-term capital gains rates. Non-qualified dividends, also known as ordinary dividends, are taxed at your regular ordinary income tax rates. Interest income from bonds or savings accounts is taxed as ordinary income.

Several strategies can help minimize tax liability within a taxable brokerage account. Holding investments for more than one year ensures gains are classified as long-term capital gains, benefiting from lower tax rates. This can reduce the tax burden compared to short-term gains. Another approach involves selecting tax-efficient investments, such as broad-market index funds or exchange-traded funds (ETFs), which have lower portfolio turnover and distribute fewer capital gains to shareholders.

Tax-loss harvesting involves selling investments at a loss to offset capital gains and a limited amount of ordinary income. Up to $3,000 of net capital losses can be used to offset ordinary income annually ($1,500 if married filing separately). Any excess losses can be carried forward to offset gains in future years.

Exploring Real Estate and Other Asset Classes

Beyond traditional securities in brokerage accounts, real estate offers another avenue for investment and diversification. Direct ownership of rental properties can provide rental income, property appreciation, and various tax deductions. Deductions may include mortgage interest, property taxes, and depreciation, which can offset rental income. However, direct ownership requires substantial capital and involves active management.

Alternatively, Real Estate Investment Trusts (REITs) offer a way to invest in real estate without direct property management. REITs are companies that own, operate, or finance income-producing real estate. They trade on major stock exchanges, providing liquidity and diversification benefits similar to stocks. REITs must distribute at least 90% of their taxable income to shareholders as dividends.

The majority of REIT dividends are taxed as ordinary income, rather than qualifying for lower capital gains rates. Through the end of 2025, individual REIT shareholders may deduct 20% of qualified REIT dividend income, effectively lowering the maximum federal tax rate for taxpayers in the highest bracket. Some REIT distributions may also be classified as return of capital, which can be tax-deferred.

For further diversification, other asset classes can be considered, though they involve different risk profiles and liquidity characteristics. Annuities are contracts with an insurance company designed to provide a guaranteed income stream, typically in retirement. They offer tax-deferred growth on earnings; taxes are paid only upon withdrawal. However, when withdrawals are made, the earnings portion is taxed as ordinary income.

Private investments, such as crowdfunding or private equity, involve investing in non-publicly traded companies or projects. These opportunities can offer high growth potential but come with increased risk and lower liquidity compared to publicly traded assets. Access to many private investment opportunities is restricted to “accredited investors.” To qualify, an individual needs an annual income exceeding $200,000 ($300,000 jointly with a spouse) for the past two years, or a net worth exceeding $1 million, excluding their primary residence.