You Maxed Out Your 401(k). Now What?

First of all, congratulations! Maxing out your 401(k) is a big deal and something many people never quite get to. It means you’re earning well, saving intentionally, and thinking ahead.

But once that box is checked, the next question almost always follows:
“Where should the next dollar go?”

The good news is that you have options. And the best choice depends on your income, family situation, tax picture, and what kind of flexibility you want down the road. Below are smart, common next steps I walk clients through once their 401(k) is fully funded.

1. Contribute to a Traditional or Roth IRA

Even after maxing out a 401(k), many people can still contribute to an IRA.

A Traditional IRA may offer a tax deduction, depending on income and whether a workplace plan is in place. A Roth IRA, on the other hand, is funded with after-tax dollars, but grows tax-free and can be withdrawn tax-free in retirement.

The big benefit here is tax diversification. Having money in both pre-tax and tax-free accounts gives more control over taxes later, especially in retirement when income sources can vary year to year.

If income limits prevent direct Roth contributions, this doesn’t necessarily mean the door is closed. More on that below.

2. Maximize a Spousal IRA

If one spouse earns little or no income, this is often an overlooked opportunity.

A Spousal IRA allows a working spouse to fund an IRA for a non-working or lower-earning spouse, as long as you file a joint tax return. This effectively doubles the household’s IRA savings and builds retirement assets in both names.

This can be especially powerful for long-term planning, tax flexibility, and making sure both partners have assets in their own name.

3. Invest in a Brokerage Account for Flexibility

Once tax-advantaged accounts are maxed, a taxable brokerage account becomes incredibly valuable.

While it doesn’t come with upfront tax deductions, it offers something equally important: flexibility.

Brokerage accounts:

• Have no contribution limits

• Allow access to funds at any age

• Are taxed at capital gains rates when investments are sold

• Can be strategically used to manage taxes in retirement

In retirement planning, this helps build assets across multiple tax buckets: pre-tax, tax-free, and taxable. That flexibility can reduce lifetime taxes and give more control over cash flow.

4. Rebuild or Boost Your Emergency Fund and Maximize Your HSA

Before investing aggressively, it’s worth checking two foundational pieces.

Emergency Fund:
Make sure short-term cash needs are covered. Having 3–6 months of expenses set aside helps avoid pulling from investments or retirement accounts when life happens.

Health Savings Account (HSA):
If eligible, this is one of the most powerful savings tools available. HSAs offer:

• Tax-deductible contributions

• Tax-free growth

• Tax-free withdrawals for qualified medical expenses

When invested and left to grow, an HSA can act like a “stealth retirement account” for future healthcare costs.

5. Invest in Kids’ or Grandkids’ Education

If education funding is a goal, a 529 college savings plan can be a smart next step.

Contributions grow tax-free when used for qualified education expenses, and many states offer tax deductions or credits for contributions. These accounts can also be flexible across beneficiaries if plans change.

This is often a way to help future generations while staying aligned with long-term family goals.

6. Explore Backdoor or Mega Backdoor Roth Strategies

High earners are often phased out of direct Roth IRA contributions, but there may still be workarounds.

Backdoor Roth IRA:
Involves contributing to a non-deductible Traditional IRA and then converting it to a Roth IRA. This can be an effective way to build tax-free assets, but it requires careful planning to avoid unintended taxes.

Mega Backdoor Roth:
If an employer plan allows after-tax contributions and in-plan Roth conversions or rollovers, this strategy can allow significantly larger Roth contributions through the 401(k).

These strategies are powerful, but they’re not “set it and forget it.” Coordination with a tax professional or financial planner is important.

7. Pay Down or Pay Off Debt

Once retirement savings are on track, debt often becomes the next lever.

High-interest debt is usually a clear priority. For low-interest debt, the decision becomes more personal. Some people prefer investing while carrying low-rate loans, while others value the peace of mind that comes with being debt-free.

There’s no one-size-fits-all answer here. The key is making the choice intentionally rather than by default.

8. Use Donor Advised Funds for Charitable Giving

For those who give regularly to charity, a Donor Advised Fund (DAF) can be a powerful planning tool.

DAFs allow:

• An upfront tax deduction in a high-income year

• Investments to grow tax-free inside the account

• Grants to charities over time

They’re especially useful when donating appreciated stock, helping reduce capital gains taxes while maximizing impact.

9. Make Annual Gifts to Family Members

Sometimes the most meaningful “investment” is helping someone else get started.

Annual gifts under the gift tax exclusion can be used to:

• Help a child or family member fund a Roth IRA

• Assist with education or first-home savings

• Reduce the size of a future taxable estate

This strategy blends financial planning with family values and legacy goals.

The Big Picture

Maxing out a 401(k) is a milestone, not the finish line. What comes next should support both your financial goals and your life goals.

The best strategy usually involves a mix of tax efficiency, flexibility, risk management, and values-based decisions. And most importantly, it should evolve as life does.

If you’ve hit this point and are wondering how to prioritize the next step, that’s often the perfect time for a more intentional plan.

Do you want to work with a financial planner who can help you evaluate your biggest financial decisions from the perspective of what has the best chance of funding your best life? Reach out and schedule a free consultation.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.