Where Do I Invest After I’ve Maxed Out My 401(k)?

If you’re asking how to invest beyond your workplace retirement plan, then you’re making huge strides in building wealth for your future! You’re laser-focused, you’ve set your goals, and you’re working toward them—and that’s a great accomplishment.

Once you’ve maxed out your workplace retirement plan, you don’t have to stop there. You still have options. Here are a few important ways you can continue to make headway with your investments and retirement savings!

1. Invest in a traditional or Roth IRA.

An individual retirement account (IRA) lets you invest for retirement outside of your workplace—and it’s the first place you should try to invest beyond your workplace retirement plan.

And just in case you’re wondering: Yes, you can put money into a traditional or Roth IRA and your 401(k) at work. For 2024, you can invest up to $7,000 in IRAs ($8,000 if you’re 50 or older).¹

With a traditional IRA, you’ll likely be able to deduct the full amount of the contributions—which means you’ll pay less in income taxes this year. That’s the good news. But the bad news is, you’ll have to pay taxes later when you take money out of the account in retirement.  

If you’d rather not have to worry about taxes in your golden years, you can opt for a Roth IRA instead. Since a Roth IRA is funded with money that’s already been taxed, your retirement savings grow tax-free and won’t be taxed when you take money out in retirement. That’s why we love Roth IRAs.

2. Open a brokerage account.

You’ve maxed out your 401(k). You’ve maxed out your IRA. Does that mean you’re done? Not so fast!

If you want to invest even more, you can open a brokerage account—also known as a taxable investment account—with an investment management company or brokerage firm. 

You’re not going to get any sort of tax break with the IRS, which is why you should only invest in a brokerage account once you’ve maxed out your tax-advantaged options like a 401(k) and IRA.

But it’s better than putting your money under the mattress! Here are some of the biggest advantages of brokerage investments:

• No required minimum distributions (RMDs): With a 401(k) or traditional IRA, you have to start taking money out once you reach a certain age.
• No income limits: You can invest even if you make a lot of money. No IRS limitations here.
• No contribution limits: You can invest as much as you want.
• More flexibility: You can take money out of the account at any time and for any reason without having to worry about early withdrawal penalties.

The downside of a taxable investment account is, you guessed it, the taxes. You’ll pay capital gains taxes on the growth of those investments because the government is, well, the government. Uncle Sam wants his share.

3. Buy real estate.

In addition to investing in the stock market, some people choose to invest in real estate. The great thing about real estate is that most properties increase in value over time and can provide a relatively stable source of rental income.

But if you think you’re ready to build your own real estate empire overnight after watching a few fixer-upper shows or some TikTok videos, you’re in for a rude awakening. Buying and managing rental properties takes a lot of time, money, patience and hard work—so you need to know what you’re getting yourself into before you dive in.

Here are a few guidelines to follow if you want to invest in real estate the right way:

• Pay in cash. Never go into debt to buy a rental property. Remember, debt always equals risk—and you’ll sleep better at night knowing your investment properties belong to you, free and clear!  
• Stay local. When you live far away from your real estate properties, it’s much more difficult to keep tabs on what’s happening with your investments.
• Prepare for problems. Make sure you have an emergency fund specifically for your real estate so you can cash flow any taxes, repairs or other maintenance issues that pop up.
• Work with a real estate agent. Finding a good real estate agent is essential. They’ll help you find properties in the right areas and navigate the many challenges you’ll encounter as a real estate investor.

4. Take advantage of your HSA.

That’s right, your Health Savings Account (HSA) could become a secret weapon to help you save for retirement.

Market chaos, inflation, your future—work with a pro to navigate this stuff.

HSAs are tax-advantaged savings accounts that come with some high-deductible health plans (HDHPs). And while HSAs are designed to help you pay for medical expenses, they can also help you save a little extra for retirement too. For 2024, individuals can save up to $4,150 in their HSA (those with family coverage can contribute up to $8,300).²

The great thing about HSAs is they come with a triple tax advantage. The money you contribute goes in tax-free, grows tax-free, and as long as you take money out to pay for qualified medical expenses, you won’t pay taxes on withdrawals. That’s a great deal!

And once you’re 65 years old, your HSA basically becomes a traditional IRA. That means you can take out money for anything you’d like, but you’ll pay taxes on it when you do—just like a traditional IRA. That’s a big reason why we like to call it a health IRA.

Just like with an IRA or 401(k), your HSA provider will give you several investment options to choose from. Keep it simple and spread your investment across four types of good growth stock mutual funds: growth, growth and income, aggressive growth and international.

There are many ways to invest with an HSA, so make sure you talk with an investment pro to go over all your options.

Work With an Investment Pro

Are you thinking about investing in one or more of these post-401(k) options? Before you make any big decisions, it’s always a good idea to reach out to a tax advisor and an investment professional first.

They’ll help you navigate the muddy tax waters and avoid making mistakes that could cost you lots of time and money. Think of them as power tools to help you build your financial future!

A SmartVestor Pro can help you create a plan for your financial goals. Just enter your information to find one in your area.

Find a SmartVestor Pro today!