What to Do After Maxing Out Your 401(k) and IRA?

After maxing out your 401(k) and IRA, the next dollar generally goes into one of a handful of places, roughly in this order: any high-interest debt you’re carrying, a backdoor or mega backdoor Roth if you’re a high earner, a Health Savings Account if you’re on a high-deductible health plan, a 529 for future education costs, an Employee Stock Purchase Plan if your employer offers one, and finally a taxable brokerage account for everything else. Insurance-based products like cash value life insurance and deferred annuities sit at the end of the line for a reason. In 2026, the 401(k) elective deferral limit is $24,500 and the IRA limit is $7,500, with a $8,000 catch-up on the 401(k) and $1,100 on the IRA for savers 50 and older, plus a special $11,250 catch-up for those turning 60 through 63 under SECURE 2.0.¹ Once those are full, the accounts below let you keep building without letting the extra cash sit idle.

Clear High-Interest Debt Before Investing More

A surplus dollar has to beat the guaranteed cost of your existing debt to be worth investing. Paying off a credit card at 22% interest produces the same result as a risk-free 22% return, and no investment offers that. Rank what you owe by interest rate and knock out anything sitting above roughly the 6% to 7% range where long-term stock market returns have historically clustered. Below that, the answer depends on your situation, but the high-rate balances almost always come first. Every cleared balance also frees up monthly cash flow, which gives you more room to invest without borrowing when something unexpected hits.

Backdoor Roth IRA for High Earners

If you earn enough to max out a 401(k), you may earn too much to contribute directly to a Roth IRA. In 2026, direct Roth IRA contributions phase out between $153,000 and $168,000 for single filers and between $242,000 and $252,000 for married couples filing jointly.¹ The backdoor Roth works around that ceiling and remains legal in 2026.

The mechanics are simple. You make a nondeductible contribution to a traditional IRA, then convert that balance to a Roth IRA. Because the contribution was after-tax, you generally owe no additional tax on the conversion. From there, the money grows tax-free and comes out tax-free in retirement.

The catch is the pro-rata rule. If you already hold pre-tax money in any traditional, SEP, or SIMPLE IRA, the IRS treats all your IRA balances as one combined pot when calculating the taxable portion of the conversion. With $93,000 of pre-tax IRA money and a $7,500 nondeductible contribution, roughly 93% of the $7,500 you convert will be taxable, because 93% of your total IRA balance was pre-tax. The clean fix is to roll existing traditional IRA balances into your 401(k) before converting, so the pre-tax IRA balance is zero. File Form 8606 with your return to report the nondeductible contribution and conversion; skipping it triggers a $50 penalty.²

Mega Backdoor Roth Through Your 401(k)

The mega backdoor Roth moves substantially more money into a Roth account each year. The 2026 total limit on all contributions to a defined contribution plan is $72,000, which includes your elective deferrals, any employer match, and after-tax contributions.³ If you defer the full $24,500 and your employer kicks in $10,000, you could put up to $37,500 in after-tax contributions into the plan, then convert those dollars to a Roth 401(k) or roll them to a Roth IRA.

Not every plan supports this. Yours has to allow after-tax contributions (separate from pre-tax and Roth deferrals) and either in-plan Roth conversions or in-service withdrawals. Ask your plan administrator directly before assuming it works. When a plan does allow it, this is one of the most powerful tools available to high earners.

Health Savings Account for Triple Tax Benefits

An HSA is the only account most workers can reach that gives you a deduction going in, tax-free growth, and tax-free withdrawals for qualified medical expenses. Eligibility requires enrollment in a High Deductible Health Plan, which in 2026 means a minimum annual deductible of $1,700 for individual coverage or $3,400 for family coverage.⁴

The 2026 contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, with an additional $1,000 catch-up for anyone 55 or older.⁴ A married couple both 55 or older, on family HDHP coverage, can each claim the catch-up through their own separate HSA.

You do not have to spend HSA money in the year you contribute it. Many savers pay current medical bills out of pocket and let the HSA compound for decades, using it as a stealth retirement account. After 65, the 20% penalty on non-medical withdrawals disappears and those distributions are simply taxed as ordinary income, so the account functions like a traditional IRA at that point.⁵ Every dollar spent on qualified medical costs along the way still comes out completely tax-free.

529 Plans for Education Costs

If children, grandchildren, or other family members will need help paying for school, a 529 plan gives after-tax contributions tax-free growth and tax-free withdrawals for qualified education expenses.⁶ Qualified costs include college and graduate tuition, room and board for students enrolled at least half-time, required books and supplies, computers used primarily for education, and fees for apprenticeship programs registered with the Department of Labor. You can also use up to $10,000 per beneficiary per year for K–12 tuition at private, public, or religious schools, and a separate provision allows up to $10,000 over a beneficiary’s lifetime toward qualified student loans.⁷

Worried about overfunding? SECURE 2.0 added a release valve. Beneficiaries can now roll unused 529 funds into a Roth IRA up to a $35,000 lifetime cap. The 529 account must have been open at least 15 years, and contributions made within the most recent five years are not eligible. Each year’s rollover is capped at the annual Roth IRA contribution limit, so moving the full $35,000 takes at least five years.

Many states offer an income tax deduction or credit for 529 contributions, with rules and amounts that vary widely. A handful of states have no income tax, and a few with income tax offer no 529 deduction. To claim the state benefit, you typically have to contribute to your own state’s plan.

Employee Stock Purchase Plans

If your employer offers an ESPP, it can be one of the simplest ways to generate extra returns from your paycheck. These plans let you buy company stock at a discount of up to 15% below fair market value through automatic payroll deductions.⁸ Many plans also include a lookback that applies the discount to whichever price was lower: the start or the end of the offering period. If the stock rose during the offering period, the discount gets applied to the earlier, lower price, pushing your effective discount well past 15%.

Tax treatment turns entirely on how long you hold the shares. The favorable treatment requires holding at least two years from the start of the offering period and one year from the actual purchase date.⁸ Meet both, and only the discount portion is taxed as ordinary income while any additional profit gets long-term capital gains rates. Sell before either deadline and the entire spread between your purchase price and the market value on the purchase date is taxed as ordinary income, no matter when you actually sell. Put those holding-period dates on a calendar.

One caution: ESPP shares concentrate your wealth in the same company that pays your salary. If the stock drops and layoffs follow, you get hit twice. A common approach is to buy through the plan, hold long enough to qualify for favorable treatment, then sell and reinvest the proceeds in a broader portfolio.

Taxable Brokerage Account

A regular brokerage account lacks the tax shelter of a retirement account, but it makes up for that with total flexibility. There are no contribution limits, no income restrictions, and no early withdrawal penalties. You can deposit anything, invest it however you want, and pull it out next month with no 10% penalty and no need to wait until 59½.⁹

Investment gains are taxable, but the rates help. Profits on assets held more than a year qualify for long-term capital gains rates that top out at 20%, and most filers pay 15% or less.¹⁰ That’s typically well below the ordinary income rate that applies to 401(k) and traditional IRA withdrawals, which is why a brokerage account belongs alongside sheltered accounts rather than being treated as a consolation prize.

When an investment drops below what you paid, selling locks in a capital loss you can use. Losses first offset any capital gains you realized during the year. If losses exceed gains, you can deduct up to $3,000 of the excess against ordinary income ($1,500 if married filing separately), and anything left carries forward indefinitely.¹¹ This only works in a taxable account, because losses inside an IRA or 401(k) have no tax consequence.

High earners who’ve filled their retirement accounts should also know about the net investment income tax. It adds 3.8% on top of your regular capital gains rate, applied to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly.¹² Those thresholds have never been adjusted for inflation since the tax took effect in 2013, so more people cross them every year. Net investment income covers interest, dividends, capital gains, rental income, and annuity income, but not wages or Social Security benefits.¹³

Cash Value Life Insurance and Annuities

These products come up once every other tax-advantaged account is exhausted. Both offer tax-deferred growth with no government-imposed contribution ceiling, which genuinely helps high earners. Both also carry costs and complications that simpler accounts don’t.

Permanent life insurance policies (whole life, universal life, variable life) build cash value that grows tax-deferred.¹⁴ You can generally access that cash value through policy loans without triggering taxable income, as long as the policy stays in force. The risk that catches people off guard is the modified endowment contract, or MEC. Fund a policy too quickly and exceed the IRS seven-pay test, and it loses its favorable tax treatment: withdrawals are taxed on an earnings-first basis, policy loans count as taxable distributions, and a 10% penalty applies to any taxable amount taken before 59½.¹⁵ The funding schedule matters enormously.

Deferred annuities let you deposit after-tax money with an insurance company for tax-deferred growth with no annual cap. Costs are the sticking point. Annual expense ratios on variable annuities often run between 1% and 3%, administrative fees add to that, and most annuities impose surrender charges on withdrawals during the first several years. A typical schedule starts at 7% in year one and declines by about a point each year until it reaches zero, usually after seven or eight years. When you take money out, earnings are taxed at ordinary income rates rather than the lower capital gains rates a brokerage account offers. For most people who have simply maxed out a 401(k) and IRA, a low-cost brokerage account is the better next step.

1
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
2
Internal Revenue Service. 2025 Instructions for Form 8606 – Nondeductible IRAs
3
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs
4
Internal Revenue Service. Revenue Procedure 2025-19
5
Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
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Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs
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Internal Revenue Service. 529 Plans – Questions and Answers
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Office of the Law Revision Counsel. 26 USC 423 – Employee Stock Purchase Plans
9
Internal Revenue Service. Topic No. 558, Additional Tax on Early Distributions from Retirement Plans Other Than IRAs
10
Internal Revenue Service. 2026 Adjusted Items – Revenue Procedure 2025-32
11
Office of the Law Revision Counsel. 26 U.S. Code 1211 – Limitation on Capital Losses
12
Internal Revenue Service. Topic No. 559, Net Investment Income Tax
13
Internal Revenue Service. Net Investment Income Tax
14
Office of the Law Revision Counsel. 26 USC 7702 – Life Insurance Contract Defined
15
Internal Revenue Service. Revenue Procedure 2001-42