Opening a retirement account is the easy part. Deciding which one to fund, in what order, and how much to put where — that's where most people either guess, follow outdated advice, or simply default to whatever their HR department set up on day one. The problem with defaulting: contribution order matters significantly. There's a logical, defensible sequence for filling retirement accounts. It's not one-size-fits-all, but the framework applies to the vast majority of working Americans with access to a 401(k) and IRA options.
The Accounts in Play: A Quick Orientation
Before sequencing, here's what makes each account distinct — four buckets with different rules, limits, and tax treatments.
Traditional 401(k)
$24,000 limit
- Pre-tax contributions — reduces income today
- Withdrawals taxed as ordinary income
- Often includes employer match
- RMDs required at 73 or 75
Roth 401(k)
$24,000 limit
- After-tax contributions — no upfront deduction
- Qualified withdrawals completely tax-free
- No income limits — available to everyone
- RMDs eliminated as of 2024 (SECURE 2.0)
Traditional IRA
$7,000 limit
- May or may not be tax-deductible (depends on income + workplace plan)
- Withdrawals taxed as ordinary income
- Broader investment options than most 401(k)s
- RMDs required at 73 or 75
Roth IRA
$7,000 limit
- After-tax contributions; tax-free qualified withdrawals
- Contributions withdrawable any time, penalty-free
- Income limits: ~$161k single / $240k MFJ (2026)
- No RMDs during owner's lifetime
The Retirement Account Order of Operations
1
Capture the Full Employer Match — Always, First, Without Exception
An employer match is an immediate 50–100% return on your contribution — a guaranteed return that no investment in any account reliably replicates. If your employer matches 100% of contributions up to 4% of your $90,000 salary, that's $3,600/year in free money. Passing on that to fund an IRA first is almost never the right move. Contribute at minimum to capture the full match. Full stop.
Universal rule — no exceptions
2
Fund a Roth IRA to the Annual Limit (If Eligible)
After capturing the full match, fund a Roth IRA next — before returning to contribute more to your 401(k). The reasons: superior investment options (full universe at low-cost brokerages vs a limited 401(k) menu), contribution flexibility (your dollars can be withdrawn any time without penalty), no RMDs, and tax diversification alongside your pre-tax 401(k). This step is most powerful for those in the 22% bracket or below. Above the income limits? Skip to Step 3.
Best for: 22% bracket or below, long horizons
3
Return to the 401(k) and Max It Out
Once the match is captured and the Roth IRA is funded, contribute as much as you can toward the 401(k) annual maximum. At $24,000 plus a fully funded Roth IRA, you reach $31,000 in annual tax-advantaged contributions. At this stage the Traditional vs Roth 401(k) decision within your plan becomes relevant — use the Roth 401(k) option if you're in a lower bracket now and expect higher income later; use Traditional if you're in the 24%+ bracket now and expect to drop in retirement.
Goal: $31,000+ in combined tax-advantaged savings
4
Health Savings Account (HSA) — the Stealth Retirement Account
If you're enrolled in a qualifying high-deductible health plan, an HSA is arguably the most tax-efficient account available: contributions are tax-deductible, growth is tax-free, and qualified medical withdrawals are tax-free — a triple tax advantage no other account matches. After 65, HSA withdrawals for any purpose are taxed as ordinary income (like a Traditional IRA), but medical withdrawals remain tax-free forever. 2026 limits: ~$4,300 individual / $8,550 family. Position this alongside Step 3 if accessible.
Triple tax advantage — only for HDHP enrollees
5
Taxable Brokerage Account
Once all tax-advantaged options are maxed, a taxable brokerage account is the natural overflow. No contribution limits, full investment flexibility, no withdrawal restrictions — but no special tax treatment on contributions or ordinary income. Long-term capital gains rates (0%, 15%, 20%) are more favorable than ordinary income rates for buy-and-hold investors. For FIRE community members, the taxable brokerage is also a necessary component of the pre-59½ income bridge alongside Roth contribution access.
After all tax-advantaged accounts are maxed