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How to Save for Retirement After Maxing Out a 401(k)

Your 401(k) is maxed out. Find out where else you can invest to help keep building wealth and for retirement.

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Key Takeaways

Maxing out savings to your 401(k) plan is great, but you may need to invest more as you plan for retirement.

Traditional and Roth IRAs offer another way to save that can provide additional tax benefits.

Discover other savings options beyond a 401(k), including mutual funds, stocks, annuities and life insurance.

Maxing out your 401(k)-retirement plan is no small feat, but is it enough to ensure a retirement free from financial stress? If you contribute the limit in your employer's retirement plan, you may also want to find additional ways to pad your retirement savings—and potentially reducing tax liabilities may be a bonus.

Retirement Plan Contribution Limits

For 401(k), 403(b) and most 457 plans, employees can contribute $22,500 for the 2023 tax year. Employees aged 50 and older can add $7,500 to their retirement plans in catch-up contributions.

But even with catch-up contributions, employer matches, and the IRS raising annual contribution limits, you may still need to set aside more money. Most people need at least 70% to 80% of their pre-retirement income to maintain their same lifestyle during retirement. However, those with bigger retirement dreams or expensive hobbies may need more. Retiring from a job with three or four weeks of vacation can suddenly feel like you have 52 weeks of vacation—and the spending that goes with it. That's why it's so important to stock up ahead of time. Here are some additional options for where to invest after maxing out your 401(k).

How To Max Out Your 401(k)

If you're not already saving the maximum in your 401(k), bumping up how much you put away may help you work toward a more comfortable retirement. If your savings have taken a hit recently because of financial situations or you've had difficulty staying ahead of inflation with your budget, you may need to find ways to increase what you set aside for retirement, even if it's a little.

To get to the maximum 401(k) contribution, consider increasing your savings by 1% to 2% each year. Before increasing your savings rate, use our calculator to check how saving more could affect your paycheck. Even small increases over the years may help you get to the amount you need to save for retirement. And by making saving a priority, you may be able to find even more money to put toward retirement.

Is Maxing Out Your 401(k) Enough?

Even if you save the maximum in your 401(k), that may not mean you have saved enough for retirement. Remember that many retirees can expect to live up to 30 years after they leave work. Start by checking to see if you're saving enough based on your age and income. If you need to boost your savings beyond your 401(k), read on for other ways to set aside money for retirement.

Individual Retirement Accounts (IRAs)

IRAs, which include Roth or traditional accounts, let you save for retirement outside of an employer plan. You can contribute to both a 401(k) and an IRA. Why IRAs? They offer additional tax benefits and ways to generate income when you stop working. As with retirement plans employers offer, the IRS sets contribution limits each year.

IRA Contribution Limits

For tax year 2023, most individuals under age 50 can save up to $6,500 in an IRA. Those over 50 can contribute another $1,000, giving them $7,500 for the tax year.

Traditional IRA withdrawals after age 59½ are taxed as current income. But you may be able to deduct your contribution on your income taxes in the year you contribute. Note that there are income limits set by the IRS for IRA contributions if you also have a workplace 401(k) plan.

With a Roth IRA, you contribute after-tax income. But you can make tax-free withdrawals on the amount you contribute at any time. All withdrawals are tax-free after age 59½ if you have held the account for at least five years.

Roth or Traditional?

Compare IRAs to see which one might be right for you.

Income limitations do apply to Roth IRA contributions too. Note that if your employer offers a Roth 401(k) option, you can enjoy similar tax benefits in retirement from your workplace plan.

Leaving your job? You can also open an IRA by rolling over 401(k) funds from a previous employer.

Taxable Accounts

After taking advantage of your tax-advantaged options, lower-interest accounts—like savings accounts or certificates of deposit—are not your only alternatives. Taxable accounts may offer more growth potential and some tax benefits, such as qualified dividend or capital gains rates.

A taxable account may provide cash flow both before and after retirement. Remember that taxable accounts don't have tax benefits like 401(k) or IRA accounts do. However, people concerned about taxes may look for tax-efficient investments in this type of account. You may also consider stocks and mutual funds.

Investing in stocks allows you to purchase a stake in an individual company, hoping the share price will rise. Though picking a growth stock may bring profits, having too much of your money in an individual security can also bring risk. Understand how much risk you're taking before you invest. To invest in individual stocks, you need to open a brokerage account with a firm.

Mutual funds allow you to invest in a basket of securities, including stocks, bonds, or a mix of the two. They offer investors a way to diversify stock and bond investments without needing to choose among individual securities.

Consider Diversification and Age in Your Investment Options

Diversifying your investments among stocks, bonds and cash equivalents helps spread out risk. How you diversify may change over the years. For example, young investors looking to grow returns over time might consider putting more money in stocks, which come with more risk but may also offer higher returns potential. Investors nearing retirement might consider decreasing risk and less exposure to stock market volatility by putting more into bonds, which may be less risky, but also may have lower returns.


If you'd like a fixed income stream for a period of time, you may want to consider an annuity as part of your retirement plan. Annuities are insurance contracts. The insurer will make payments to you at some point in the future—or immediately. Annuities can be purchased through a payment plan or a lump-sum amount, and you can receive payments in a lump sum or over time, depending on the terms of your contract.

Keep in mind that annuity fees may be higher than other investment options. Another drawback may be the ability to access your money. Some annuities come with surrender fees if you want to break the contract early.

Life Insurance

Life insurance policies are usually seen as a way to leave money for the family after death. But some policies can also be used to build savings for retirement. One such product is permanent life insurance. Premiums you pay go to both your death benefits and a cash account. The money is tax-deferred and can be accessed later for retirement.

Permanent life insurance can be expensive, as monthly premiums and initial set-up fees can be costly. This isn't necessarily the best option for all savers, but it can add to your retirement savings.

Health Savings Accounts

With a Health Savings Account (HSA), you put aside money for current and future health care costs. But you also may be able to invest the money, similar to how you do in a 401(k), and earn interest. The availability to do this and the investment options depend on the account's custodian.

HSAs are combined with a high-deductible health plan (HDHP). High-deductible plans typically have lower premiums than other health plans. However, you need to pay out of pocket for doctor's visits, prescriptions, and other health care costs until you meet the deductible.

HDHP enrollees can open an HSA to save on out-of-pocket costs. Contributing to an HSA has tax advantages; you can carry over the money you don't use yearly and earn interest. An HSA can also act as an investment account for health care costs in retirement.

HSA Contribution Limits

For 2023, individuals can save $3,850, and families can contribute $7,750. Those over 55 can put an additional $1,000 in an HSA.

HSA contributions are pre-tax going in. Withdrawals for qualified health care costs are always tax-free and penalty-free. At age 65, you can use the money for non-health care and other retirement expenses without a penalty; however, non-health care cost withdrawals will be taxed as ordinary income.

We encourage clients to start investing as the funds build up. Unlike 401(k)s and IRAs, you may not want to fully include HSA dollars in your retirement plan (in case you need to use it beforehand). And while you can touch the money after 65 for any reason, advisors may encourage you to limit the money for health care costs or tax-free eligibility and help ensure you have money to cover those expenses in retirement.

Don't Let Your 401(k) Limit Your Future Finances

You're not limited to your employer's plan. If you want to maximize your retirement savings, multiple options may support the goal of comfortably enjoying your golden years.

Saving for Retirement is a Critical Goal

Let us help you review strategies to help you reach it.

Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.

Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

Diversification does not assure a profit nor does it protect against loss of principal.

You could lose money by investing in a mutual fund, even if through your employer's plan or an IRA. An investment in a mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.