Where to Save After Maxing Out My 401(k): The Hierarchy of Saving

For high earners who are disciplined savers, maxing out your 401(k) is a key milestone, but it’s just the beginning. The next question is: Where should I save next? Your best next move depends on your tax bracket, family situation, and long-term goals. Fortunately, there is a clear, strategic hierarchy that can help guide the way.

Step 1: Get the Foundation Right

Emergency Fund (3–6 Months of Expenses)

Before investing further, ensure you have 3 to 6 months of essential expenses set aside. This helps avoid tapping long-term investments during disruptions. High-net-worth households with business income or complex cash flows may want a larger buffer. Use a high-yield savings account or money market fund to preserve liquidity while earning interest.

High-Interest Debt

Pay off any debt with rates over approximately 6 to 7 percent. With interest rates above 5 percent in 2025, eliminating high-cost debt can offer a better guaranteed return than many investments, especially after taxes and fees.

401(k) Employer Match

Never leave free money behind. Contribute enough to receive the full match. In 2025, the 401(k) employee deferral limit is $23,500, and the total contribution limit (including employer match) is $69,000. For ages 60 to 63, the One Big Beautiful Bill Act (OBBBA) added a new $11,250 catch-up contribution, offering major savings leverage for near-retirees.

Step 2: Optimize Tax-Advantaged Accounts

Traditional 401(k) vs. Roth 401(k)

This early choice determines when you’ll pay taxes.

• Traditional (pre-tax): Reduces taxable income today; withdrawals are taxed in retirement.

• Roth: No deduction today; qualified withdrawals are tax-free.

General rule: Choose Roth if your tax rate today is lower than what you expect in retirement. Choose pre-tax if your current tax rate is higher, and retirement income may be lower.

2025 Roth IRA Income Limits

• Single: Phaseout starts at $153,000 and ends at $168,000 or more

• Married Filing Jointly: Phaseout starts at $228,000 and ends at $243,000 or more

If you exceed these limits, consider the Backdoor Roth IRA (see below).

Health Savings Account (HSA)

If you have a high-deductible health plan, the HSA is one of the most tax-efficient savings vehicles:

• Tax-deductible contributions

• Tax-free growth

• Tax-free withdrawals for medical expenses

2025 Limits: $4,300 (individual), $8,550 (family). After age 65, funds can be used for non-medical expenses without penalty, though they are taxed as income.

Step 3: Beyond the Basics

Backdoor Roth IRA

For high earners over the Roth income limits:

1. Contribute to a non-deductible traditional IRA

2. Convert to a Roth IRA

Avoid complications from the pro-rata rule by ensuring you don’t hold significant pre-tax IRA balances. 

Spousal IRA

If your spouse doesn’t have earned income, you can still contribute to an IRA for them:

• 2025 Limit: $7,000 ($8,000 if age 50 or older)

• Helps double your household’s IRA savings potential

Mega Backdoor Roth (If Available)

Some 401(k) plans allow after-tax contributions up to the overall $69,000 limit, which can be rolled into a Roth IRA or converted in-plan.

• Can unlock $20,000 to $40,000 or more of additional Roth contributions annually

• Check if your plan allows in-service conversions

• Review how OBBBA deductions affect your broader AGI

Advanced Strategy for High Earners – Cash Balance Plans

If you've already maxed out your 401(k), Backdoor Roth, HSA, and other tax-advantaged vehicles, a Cash Balance Plan may be the most powerful next step, especially for business owners, partners, or high-earning professionals with consistent income and the ability to commit to multi-year savings.

Why It Works:

• Massive contribution limits: Especially valuable for those age 45+, with limits increasing substantially by age.

• Tax deduction: Contributions are fully deductible to the sponsoring business.

• Stackable with 401(k) plans: You can contribute to both in the same year for even greater tax sheltering.

• Accelerates retirement savings: Ideal for late-career professionals looking to catch up quickly.

Who Should Consider It:

• Business owners, law firm partners, medical practice owners, and others with stable, high incomes.

• Those seeking to minimize current taxable income, build retirement assets rapidly, and retain key employees through plan participation.

• Households earning $400K–$1M+ annually who have already exhausted 401(k) and Roth options.

Key Considerations:

• Requires annual funding and actuarial certification.

• Best suited for those able to commit to a 3–5+ year time horizon.

• Plans must meet minimum funding standards and are subject to IRS and PBGC compliance (unless exempt).

Taxable Brokerage Account: Your Overflow Bucket

Once you’ve maxed out all available tax-advantaged accounts, a taxable brokerage account becomes your default savings destination. It offers full flexibility, no contribution limits, and no withdrawal restrictions—but it comes with capital gains and dividend taxes.

Use this account for long-term investing once other options are full. Prioritize:

• Individual Stocks, ETFs, and index funds for low turnover and tax efficiency

• Municipal bonds, if you're in a high-tax state and want tax-exempt income

Step 4: Saving for Your Children

Trump Account

The new “Trump Account” created by OBBBA allows contributions of up to $5,000 per year for a child under 18, even if they have no earned income. Employers can also contribute up to $2,500.

• Grows tax-deferred

• Converts to a traditional IRA when the child turns 18

• Ideal for using the $1,000 federal child match

Use this for the $1,000 federal incentive, then evaluate whether a 529 or Roth IRA (if the child has earned income) makes more sense for long-term growth.

529 Plan

• Grows tax-free when used for education

• Can now roll over up to $35,000 into a Roth IRA starting in 2025, subject to:

  • 15-year minimum account age

  • Roth annual contribution limits

  • No rollovers from contributions made within the last 5 years

UTMA/UGMA Accounts

• Taxable accounts held in the child’s name

• Transfer at age 18 or 21, depending on the state

• Useful for non-college expenses, such as a car or business expenses

• Count against college financial aid

With the recently increased $15 million per person estate exemption, these may have renewed estate planning relevance.

Kids Roth IRA

If your child has earned income, they can contribute up to $7,000 per year (2025 limit). This is ideal for long-term compounding, especially if they work for a family business.

Wrapping It All Up

Smart wealth building isn’t just about what you invest in. It’s about where and when you invest. Once your 401(k) is maxed out, there’s a smart order of operations for your next dollar.

With the recent changes in law, planning has become more nuanced, but also more rewarding. Understanding how these changes interact with traditional strategies is essential.

We help families optimize this hierarchy with precision, minimizing taxes, maximizing control, and building multigenerational wealth.

Have questions about what’s next for your savings strategy? We would be happy to provide a second opinion. 

Disclaimer: This article provides general educational information and should not be considered personalized financial, tax, or legal advice. Individual circumstances vary, and decisions should be made with the guidance of qualified professionals. The content reflects our understanding as of the publication date and may not account for future changes. Atlantic Edge Wealth does not guarantee the accuracy or completeness of the information. Past performance is not indicative of future results, and investing involves risks. Always consult experts before making financial decisions.