Maxing out your 401(k) may not be the absolute best way for you to fund your retirement.

It’s true that 401(k)s can be excellent places to start investing for your retirement. Indeed, if you get a match on your contribution, investing to maximize that match is hands down the first investment you should make. Yet once you get beyond that match, there are often good reasons to pick a different approach than simply throwing more money into your 401(k).

Those reasons include better flexibility, more investment choices, lower overhead costs, and more customizable withdrawal options in retirement. When you look through the lens of your total financial picture, it can start to make sense to look at other accounts first, before going back to your 401(k) for investments above your match amount. With that in mind, these three retirement strategies can run circles around a 401(k), if used correctly.

No. 1: Roth IRA
For many reasons, a Roth IRA can be a superb place to invest for retirement. Once money is in your Roth IRA, it can compound inside that account tax-free for the rest of your life. Contrast that to a 401(k), where you face required minimum distributions once you hit age 72. Holding on to that tax advantage throughout retirement makes a Roth IRA a powerful tool.

In addition, Roth IRAs allow you to withdraw your direct contributions and your rollover contributions after they’ve been in your account for five years, for any reason. In both cases, once you qualify, those contribution withdrawals are completely tax and penalty free. That withdrawal flexibility offers a path to tapping some of your retirement money well before standard retirement age if you’re looking for a path to a very early retirement.

Plus, since Roth IRAs can be held in most brokerages, you’ll likely have access to more investment choices than the limited set of funds your employer generally offers as part of your 401(k). If you’re into individual stock research, options investing, or other strategies beyond simple mutual fund purchasing, a Roth IRA will much more likely suit your style than a typical 401(k).

If there’s a downside to Roth IRAs, it’s that you can only directly contribute $6,000 per year ($7,000 per year if you’re over age 50), which tends to limit the how much money you can put to work.

No. 2: Standard brokerage account
Although standard brokerage accounts don’t have the same tax advantages as 401(k)s, there are good reasons to invest in one, treating it as an account you’re using for retirement planning.

In particular, there are no limits to the amount you can contribute to a standard brokerage account and no age restrictions or limitations when withdrawing your money. That makes a standard brokerage account a great tool for those who are looking to either retire early or have started saving for retirement later in life and thus need to save more than they can inside a 401(k).

Plus, if you buy companies with the intent to hold them for the long haul, you’ll typically only pay taxes on your dividends while you hold your shares. Once you do sell, capital gains taxes are typically lower than income tax rates, as long as you’ve owned your shares for over one year.

As if that weren’t enough, your heirs will get a step-up in basis to the value of your shares around the time of your death for stocks they inherit from you in a standard account. If you’re thinking about the very long term, such a move can help your money last into the next generation much more effectively.

No. 3: Health Savings Account
Although health savings accounts (HSAs) are intended for healthcare expenses, once you turn 65, you can withdraw money you have in your HSA for any reason and only pay income taxes on that money. That makes HSAs similar to traditional IRAs from the perspective of spending money from them in retirement.

Even then, if you withdraw the money to pay for qualified healthcare expenses, your HSA retains its “triple tax advantaged status” throughout your life. That status comes from three factors. First, money you deposit into a health savings account will get a tax deduction. Second, the money in your account compounds tax-deferred while it stays in your account. And third, when withdrawn to pay for qualified healthcare expenses, the money comes out of your account completely tax free.

Particularly when you consider that most people face higher healthcare expenses as they age, that benefit can be especially valuable. That combination makes an HSA an excellent tool to have in your retirement plan arsenal.

The most important thing you can do is start today
Regardless of what type of account you invest in, one of the most important things you can do for your future is to start investing for your retirement. Whether you chose the simple approach of socking away as much as you’re able to inside your 401(k) or take advantage of what these other accounts offer, the sooner you get started, the better your chances of success. So make today the day you get your plan in place to be able to start aggressively investing for your future.

— Chuck Saletta

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Source: The Motley Fool