Your Retirement Savings Roadmap: The Right Order For Every Dollar
- Personal Finance
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- 12 minutes read
Majority of individuals contemplating retirement savings can’t decide between 401(k), Roth IRA, HSA, taxable brokerage, or traditional IRA. One of the questions is: “I have $500 per month to save, where will I put it first?”
The truth is that there is an order that tends to work better for most people, focused on free money, tax benefits, and flexibility. This isn’t about maxing everything out, most savers can’t, but it is about using a priority system that fits your income level and long-term aims.
Start with the most advantageous buckets, and adjust as your income changes over time. This article will take you through that list step by step, and with real numbers, for 2026.
Get Free Money First: Employer 401(k) Match
A 401(k) up to the employer match is the first place that everybody should begin. When your employer contributes to your plans, then you are making an immediate gain on your savings, which you would not be able to make anywhere else. A common formula is 50% of the first 6% you contribute or 100% of the first 3%.
Suppose you are earning $60,000 and you are paying 6% of your income, that is, $3, 600 annually. Taking into consideration that your employer is paying half of that, that is an extra $1800. Your total becomes $5,400, going toward retirement, effectively a built-in return before investments even grow.
No advisor ever questions skipping this, because it’s free money on the table. It’s worth reshuffling your budget to afford this before other savings.
Step 2: Max Your Health Savings Account (HSA) If Eligible
Provided you have a high-deductible health plan and qualify to use one of the Health Savings Accounts (HSAs), then this tends to be next on the list. For 2026, the IRS permits a limit of up to $4400 on an individual and $8,750 on family coverage.
Individuals who are 55 years and above have an opportunity to make a catch-up of $1,000. One of the three tax benefits of HSAs includes the deductible contributions, tax-free growth, and tax-free withdrawals in cases of medical expenses.
In case you envision a need to pay healthcare expenses during retirement, HSA funding offers greater intelligence than a 401(K) or IRA. One option is out-of-pocket payment, which you can use to increase your balance and make your HSA tax-free over the years.
You are eligible to take the HSA money out after the age of 65 without a payment penalty (on all but medical withdrawals). This makes the HSA an effective supplemental retirement account among a great number of others.
Step 3: Fund a Roth IRA (If You Qualify)
After the match and the HSA, it is best to consider a Roth IRA, and this applies to most, particularly those who are still in their careers or low-income people. In 2026, Roth IRA can contribute a limit of $7,500 with an extra $1,100 catch up limit for people aged 50 years and above.
Single begins to lose eligibility above approximately $153,000 of modified adjusted gross income and cannot receive it past approximately $168,000. The range of phase-out of married couples who can file jointly is about $242,000 to $252,000.
Roth IRAs have advantages over employer plans. They have a broad range of investment options compared to a standard 401(k), no necessary minimum distributions in their lifetime, and the money (not income) can be taken penalty-free in case of an emergency.
Step 4: Back to the 401(k) for Tax Savings
After you match, get the full amount out of the HSA and deposit into a Roth IRA; it makes sense to go back to your 401(k) and save more. In 2026, you can contribute up to $24,500 to a 401 (k), subject to a catch-up contribution of $8,000 if you are 50 years and above, making a total of $32,500.
Some plans allow employees between 60 and 63 to make a further contribution of up to $11,250. This is a step that would be of benefit to high earners in the 24% marginal tax bracket and above, since every dollar you defer in this case would decrease your current Taxable income.
Advanced Moves: Backdoor Roth, Taxable Accounts, and Mega Backdoor Roth
For many people, saving steps 1 through 4 takes years, but if you have extra after those basics, here are logical extensions.
Traditional IRA or Backdoor Roth
In case your income is excessively large to contribute to a Roth IRA, then you may contribute to a traditional IRA and then convert to a Roth IRA soon afterwards – a backdoor Roth.
This plan revolves around income brackets and is capable of accumulating greater tax-free returns. However, you should be careful of the IRS pro-rata rule when you have other balances in a traditional IRA, because this has an impact on the tax cost of the conversion.
Taxable Brokerage Accounts
After filling all the tax-favored accounts, there is complete freedom to invest in a brokerage account that is taxed. Early-withdrawal penalties are non-existent, and on the long-term capital gains, the capital gains are taxed at favorable rates when capital gains are held within a period that is more than one year.
Mega Backdoor Roth (If Available)
Other 401(k) plans permit after-tax contributions that can be rolled over to a Roth within the plan. The 2026 contribution limit is a total of $72,000, which will include employer contributions and all employee contributions, and therefore, there may be a lot of additional savings available compared to the conventional contribution limits. Not all plans offer this, but for high earners looking for more tax-free room, it’s worth exploring.
Special Situations & Adjustments
Everyone’s finances have wrinkles. Debt with very high interest (credit cards with fees of 15-25%) may simply reduce savings at a faster rate than investments increase. Settlement of a high-interest debt should be prioritised before aggressive retirement funds.
If you don’t have an emergency fund (three to six months of expenses), building that first keeps you from accessing retirement cash early.
Another thing you should do is when you get a raise is to put more money into retirement instead of spending it to live exceptionally.
Simple Flowchart Summary
For most people, the order looks like this:
- 401(k) up to employer match
- Max HSA (if eligible)
- Max Roth IRA (if eligible)
- Max 401(k) contributions
- Backdoor Roth (if needed)
- Taxable brokerage account
- Mega Backdoor Roth (if available)
A quick income guide:
- Under $50,000: Steps 1–2 are priority
- $50,000–$100,000: Steps 1–3 are reachable
- $100,000–$200,000: Steps 1–4 are realistic
- $200,000+: Execute steps up to 7 as feasible
Conclusion & Next Steps
One does not need perfection to progress. Wealth can be created anywhere, and this remains the same through time. Revise your plan periodically – once every January or once big life events such as a job change, salary increase, marriage or a new baby occur.
This week, check if your 401(k) contribution hits your employer’s match. In the event it does, open a Roth IRA and have automatic monthly transfers. Put a reminder in your calendar to raise the savings by 1% after six months. Minor, incremental steps add up to a comfortable retirement.
Featured Image Credit: Author
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
