401(k), IRA and HSA: which account, in what order

The accounts, briefly

A 401(k) takes money from your paycheck, often with an employer match. An IRA is opened by you, independent of any employer. An HSA, if you qualify, is the only common account that is untaxed going in, growing and coming out for medical costs.

Traditional or Roth

Traditional contributions reduce taxable income now and are taxed on withdrawal. Roth contributions give no break now and come out tax-free later. The honest answer is that it depends on whether your tax rate is higher today or in retirement — and since nobody knows, holding some of each is a reasonable hedge.

A workable order

1. 401(k) up to the full employer match — free money, first, always. 2. HSA if eligible, for its unique treatment. 3. High-interest debt. 4. IRA, then more 401(k) up to the annual limits. 5. Taxable brokerage for anything beyond.

Watch the details

Vesting schedules can claw back employer money if you leave early. Contribution limits reset each calendar year and cannot be carried forward. And the fund choices inside the plan matter as much as the wrapper — a good account holding an expensive fund is still expensive.