The right order: 401k, Roth IRA, and beyond
A definitive five step contribution order with 2026 dollar amounts. Most guides hedge. This one commits.
- 1
1.401k to the employer match
Match cap (often 3 to 6 percent of salary)The match is the highest guaranteed return in the tax code. A 50 percent match is an instant 50 percent gain, untethered from market performance.
Stop here long enough to capture every available match dollar. Then move on.
- 2
2.Max the Roth IRA
$7,500 in 2026 ($8,600 at age 50 plus)Tax free growth, no RMDs in your lifetime, contributions accessible at any age. The investment menu is the entire market, not a plan menu.
Above the income phaseout, use the backdoor Roth IRA path described in step 2 alternative.
- 3
3.Back to the 401k
Up to $24,500 employee cap (or higher with catch ups)Once the match is captured and Roth IRA is full, additional 401k dollars cut current taxable income and shelter growth from interim taxes.
If retirement tax bracket will be lower than today, prefer pre tax 401k. If higher, choose Roth 401k where available.
- 4
4.HSA, if eligible
$4,300 individual or $8,550 family in 2026Triple tax advantage: deduction now, tax free growth, tax free withdrawals for qualified medical expenses at any age.
Requires a high deductible health plan. Treat the HSA as a long term investment account, not a checking account.
- 5
5.Taxable brokerage
Whatever remains of your savings rateLong term capital gains and qualified dividends are taxed at preferential rates. No contribution limit, no early withdrawal penalty, full liquidity.
Use tax efficient funds. Bonds and high turnover funds belong in tax advantaged accounts when possible.
Why this order beats every alternative
Three sentences each, no filler.
A 50 percent employer match is an immediate 50 percent return on contributed dollars. The S&P 500 has averaged roughly 10 percent annually before inflation. The match wins on day one, every year, with no market risk.
A $7,500 contribution at age 30 invested at a 7 percent return becomes about $80,000 by age 65. That growth is never taxed if the account is qualified. No 401k achieves the same result without a Roth election and even then loses the open investment menu.
The 401k cap of $24,500 is large, but step 3 only matters once steps 1 and 2 are full. At that point any additional pre tax dollar still saves taxes today and grows tax deferred until withdrawal.
When to break the order
Exception 1: high interest debt
Capture the match in step 1. Then pause the order and pay off any debt above roughly 8 percent. A 22 percent credit card APR is a guaranteed 22 percent loss. Resume at step 2 once that debt is clear.
Exception 2: no employer match available
Skip step 1 entirely. Start at step 2 with a fully funded Roth IRA. From there, choose between the 401k and a taxable brokerage based on the plan fees and the investment options inside the 401k menu.
How 15 percent of income fills the order
A scan across four salary levels. Numbers assume the steps are filled in order.
| Salary | 15 percent goal | Step 1 match | Step 2 Roth IRA | Step 3 back to 401k |
|---|---|---|---|---|
| $50,000 | $7,500 | $3,000 (6 percent) | $4,500 | $0 |
| $75,000 | $11,250 | $4,500 (6 percent) | $6,750 | $0 |
| $100,000 | $15,000 | $6,000 (6 percent) | $7,500 (full) | $1,500 |
| $150,000 | $22,500 | $9,000 (6 percent) | $7,500 (full) | $6,000 |
Illustrative match assumes a common 50 percent match up to 6 percent of salary structure. Roth IRA at the income level above $150k may need the backdoor Roth path.
Strategy questions
Should I max out the 401k or Roth IRA first?+
Capture the employer match first. After the match is captured, max the Roth IRA before maxing the 401k. The Roth IRA brings tax free growth, no RMDs, and unrestricted investment choice. Once it is full, return to the 401k toward the $24,500 employee cap.
Does the order change if I have credit card debt?+
Yes, partially. Capture the employer match first, then redirect to high interest debt (anything above roughly 8 percent). Once the debt is gone, resume the order at step 2.
What if my employer does not match?+
Skip step 1 and start at step 2. Without a match, the 401k loses its biggest advantage. Fund a Roth IRA in full, then decide whether the 401k or a taxable brokerage is the better next dollar based on plan fees and investment menu.
How much of my income should I save for retirement?+
A common rule of thumb is 15 percent of gross income across all retirement accounts, including the employer match. Younger workers can hit 15 percent with the match plus a maxed Roth IRA. Older workers may need to add 401k contributions on top.