Tax-advantaged accounts let you grow money without paying taxes on the growth — either now, later, or both. The order in which you fill these accounts determines how much of your investment gains the government takes. Getting the order right costs nothing extra and can add tens of thousands of dollars to your retirement outcome over time.
This article covers the specific sequencing of 401k, HSA, Roth IRA, and traditional IRA contributions. For the broader question of what to do with money before and after investing (debt payoff, emergency fund, etc.), see Financial Order of Operations.
The Accounts, Quickly
Each account has different rules, limits, and tax treatment. Here’s a concise summary.
401k and 403b
Offered through your employer. Contributions come out of your paycheck before taxes (traditional) or after taxes (Roth). The 2026 employee contribution limit is $24,500. If you’re 50 or older, you can contribute an additional $8,000 catch-up contribution, for a total of $32,500 — and if you’re age 60–63, a higher catch-up of $11,250 applies. These limits change most years, so confirm the current figures at IRS.gov.
Many employers match a portion of your contributions — free money that immediately boosts your return. A common structure is 50% match on contributions up to 6% of salary, though plans vary widely.
For a deeper explanation of how these accounts work, see What Is A 401k?
Traditional IRA
An individual account you open yourself, not through an employer. Contributions may be tax-deductible depending on your income and whether you’re covered by a workplace retirement plan. Growth is tax-deferred; you pay taxes when you withdraw in retirement.
The 2026 contribution limit is $7,500, or $8,600 if you’re 50 or older.
The deductibility phase-out for 2026: if you have a workplace retirement plan, the deduction phases out between $81,000–$91,000 (single) and $129,000–$149,000 (married filing jointly). Above those ranges, contributions are still allowed but not deductible.
Roth IRA
Also an individual account you open yourself. Contributions are made with after-tax money. Growth and qualified withdrawals are completely tax-free. There’s no required minimum distribution during the owner’s lifetime.
The 2026 contribution limit is the same as the traditional IRA: $7,500 ($8,600 if 50+). Note: this limit is shared between traditional and Roth IRAs — you can split contributions between them, but the combined total can’t exceed $7,500.
Roth IRA income limits for 2026:
- Single filers: Full contribution up to $153,000; phases out between $153,000–$168,000; no direct contribution above $168,000
- Married filing jointly: Full contribution up to $242,000; phases out between $242,000–$252,000; no direct contribution above $252,000
For a detailed comparison of traditional vs. Roth, see Traditional IRA vs. Roth IRA.
HSA (Health Savings Account)
Only available if you’re enrolled in a High Deductible Health Plan (HDHP). The HSA offers a triple tax advantage — the only account in the US tax code with this structure:
- Contributions are tax-deductible (or pre-tax if payroll-deducted)
- Growth is tax-free
- Withdrawals for qualified medical expenses are tax-free
The 2026 contribution limits:
- Individual coverage: $4,400
- Family coverage: $8,750
- Catch-up contribution (age 55+): additional $1,000
After age 65, you can withdraw for any reason (not just medical) and pay ordinary income tax — making it function like a traditional IRA at that point, but with the added benefit of tax-free medical withdrawals.
For more on HDHPs and how the HSA fits into health insurance decisions, see HSA vs. FSA vs. HDHP.
The Priority Order
Given these accounts’ different tax advantages, here’s the optimal order for most people:
Step 1: 401k Up to the Full Employer Match
Before anything else, contribute enough to your 401k to capture every dollar of employer match available to you. An employer match is an immediate 50–100% return on that contribution. No investment account, tax advantage, or strategy beats it.
If your employer matches 50% of contributions up to 6% of your salary, and your salary is $80,000, that’s up to $2,400 in free annual contributions. Not contributing enough to capture this is leaving a guaranteed return on the table.
Don’t overthink the investment options in your 401k at this stage. Even if the fund choices are mediocre, the employer match makes it worth doing first.
Step 2: HSA to the Max (If You Have an HDHP)
If you’re enrolled in a high-deductible health plan, the HSA is the most tax-efficient savings vehicle available. The triple tax advantage beats every other account type.
The key is to invest the money in the HSA rather than leaving it as cash. Most HSA providers offer investment options once your balance exceeds a threshold (often $1,000–$2,000). Invest in index funds or a target-date fund and let it grow tax-free.
The best strategy: if you can afford to pay current medical expenses out of pocket, do it. Don’t spend the HSA. Let it compound. Save your receipts for qualified medical expenses — there’s no time limit on reimbursement, so you can withdraw for expenses from this year decades from now.
By retirement, a well-funded HSA can cover a significant portion of healthcare costs (historically one of the largest retirement expenses) entirely tax-free.
Step 3: Roth IRA to the Max
After capturing the employer match and maxing the HSA, fill your Roth IRA. The tax-free growth and tax-free withdrawal in retirement are especially valuable for:
- People currently in lower tax brackets (likely to be in higher brackets later)
- People with a long time horizon (more years for tax-free compounding)
- People who want to minimize required minimum distributions in retirement
- Anyone who values flexibility (Roth contributions, not earnings, can be withdrawn anytime without penalty)
If you don’t have a Roth IRA yet, open one at a low-cost brokerage (Fidelity, Vanguard, or Schwab are the commonly recommended options) and invest in index funds. See What Is An Index Fund? and How To Start Investing for more.
If your income exceeds the Roth IRA income limit, see the Backdoor Roth section below.
Step 4: 401k to the Max
After the Roth IRA is maxed, go back to the 401k and increase contributions toward the $24,500 annual limit.
At this point you’ve already captured the employer match. Now you’re evaluating pre-tax 401k contributions on their own merits: tax deferral today vs. paying taxes in retirement. Whether to use traditional (pre-tax) or Roth 401k contributions here depends on your tax situation, covered below.
Step 5: Taxable Brokerage Account
Once all tax-advantaged accounts are maxed, a taxable brokerage account is the next step. You pay taxes on dividends and capital gains, but there are no contribution limits, no income restrictions, and no withdrawal rules. You can invest any amount and access it at any time.
For more on what a brokerage account is and how it works, see What Is A Brokerage Account?.
Summary Table
| Priority | Account | 2026 Limit | Do This When |
|---|---|---|---|
| 1 | 401k | Up to match only | Always — free money |
| 2 | HSA | $4,400 / $8,750 family | If you have an HDHP |
| 3 | Roth IRA | $7,500 ($8,600 if 50+) | If income-eligible |
| 4 | 401k | $24,500 ($32,500 if 50+) | Max after Roth IRA |
| 5 | Taxable brokerage | No limit | After all above are maxed |
Traditional vs. Roth: Which to Choose?
The core question is whether your tax rate is higher now or in retirement.
Roth is better when:
- You’re early in your career and currently in a lower tax bracket
- You expect to earn more in the future (and pay more taxes)
- You have many years of compounding ahead
- You want tax-free income in retirement to manage Medicare premiums or required minimum distributions
Traditional (pre-tax) is better when:
- You’re in a high tax bracket now and expect a lower bracket in retirement
- You want to reduce your current taxable income
- You’re close to a tax bracket cutoff and pre-tax contributions would push you into a lower bracket
When in doubt, most financial planners suggest using Roth options early in your career and shifting toward traditional later as income grows. Diversifying between pre-tax and Roth balances is also a reasonable approach — it gives you flexibility to manage taxable income in retirement.
Backdoor Roth IRA (For High Earners)
If your income exceeds the Roth IRA income limits, you can still contribute through what’s commonly called the backdoor Roth:
- Make a non-deductible contribution to a traditional IRA (no income limit on contributions, only on deductibility)
- Convert the traditional IRA to a Roth IRA
If you have no other pre-tax IRA balances, this conversion is straightforward. You pay taxes only on any earnings between contribution and conversion (typically minimal if done quickly), and the money then grows tax-free in the Roth.
Important: If you have existing pre-tax IRA money (from a rollover or deductible contributions), the IRS pro-rata rule applies. The conversion is taxed proportionally across all your IRA balances, which can make the backdoor Roth less clean. In that case, rolling your pre-tax IRA into a 401k first (if your plan allows) can clear the way.
The backdoor Roth is a legal and widely used strategy. Make sure you file Form 8606 with your taxes to document non-deductible contributions.
Mega Backdoor Roth (If Your Plan Allows It)
Some 401k plans allow after-tax contributions beyond the standard employee limit. If yours does, and if it allows in-service withdrawals or in-plan Roth conversions, you can contribute after-tax dollars and convert them to Roth, potentially adding tens of thousands per year to tax-free accounts.
The total 401k limit (employee + employer + after-tax) is $72,000 in 2026. After the $24,500 employee contribution and employer match, there may be a significant gap available for after-tax contributions that can then be converted to Roth.
This is a more advanced strategy and depends heavily on your specific plan documents. Check with your 401k plan administrator or HR department to see if your plan supports it.
Common Mistakes
Not capturing the full employer match. This is the most expensive mistake — it’s a guaranteed return you’re walking away from.
Leaving HSA funds in cash. HSAs held in cash savings earn almost nothing. The tax advantage only becomes powerful when the money is invested and compounding over years.
Waiting to open a Roth IRA. The value of a Roth is in the tax-free compounding over time. Every year you delay is a year of tax-free growth you don’t get back.
Ignoring the IRA after maxing the 401k. Some people max their 401k and stop without considering a Roth or traditional IRA. The IRA adds $7,500 in additional tax-advantaged space annually — use it.
Confusing contributions with investments. Putting money into an IRA or HSA doesn’t automatically invest it. Log in and confirm the money is actually invested in something, not sitting as uninvested cash.
Frequently Asked Questions
Can I contribute to both a 401k and a Roth IRA in the same year?
Yes. 401k and IRA contribution limits are independent. You can max both in the same year as long as you meet the income requirements for each. The $24,500 401k limit and the $7,500 IRA limit do not offset each other.
What if I can’t afford to max everything?
Prioritize in order. Capture the employer match first — always. Then HSA if applicable. Then Roth IRA if income-eligible. Then back to the 401k. Contribute as much as you can at each stage and move down the list when possible. You don’t have to max every account to benefit from using them.
Can I contribute to a traditional IRA and a Roth IRA in the same year?
Yes, but the combined contribution can’t exceed $7,500 (or $8,600 if 50+). For example, you could put $3,750 in a traditional IRA and $3,750 in a Roth IRA in the same year.
Does my employer’s HSA contribution count toward my limit?
Yes. The $4,400 individual and $8,750 family limits include both your contributions and any employer contributions to your HSA. If your employer contributes $500 to your HSA, you can contribute up to $3,900 (individual) or $8,250 (family) yourself in 2026.