Which Tax-Advantaged Account Should You Fund First? A 2026 Guide for Savers
Not sure where to put your savings? A 2026 order of operations for your 401(k) match, HSA, Roth or traditional IRA, 529 plan and taxable brokerage account.
If you're saving money and aren't sure where it should go, a common order works as a starting point: your 401(k) up to the full employer match, a health savings account (HSA) if you're eligible, a Roth or traditional IRA, the rest of your 401(k), goal accounts such as a 529 plan, and finally a regular taxable brokerage account.
Two things come before any of it: enough cash to handle an emergency, which the Consumer Financial Protection Bureau calls one of the first steps you can take to start saving, and a plan for any high-interest debt.
As a Houston CPA and hourly financial planner, I hear this question often from good savers with money left over and too many account types to choose from. The order above is a framework with exceptions, not a rule.
This guide uses 2026 figures. The IRS hasn't published the 2027 limits for 401(k)s and IRAs yet, so the only 2027 figures here are the official HSA limits.
This is general education, not advice for your specific situation.
What order should I fund my accounts in?
- Your 401(k) or 403(b), up to the match. A match is money you get only if you contribute. The IRS gives the example of a plan that contributes 50 cents for each dollar you put in. Check the vesting schedule too, since employer money may take years of service to become fully yours.
- An HSA, if you have a qualifying high-deductible health plan. You get a deduction going in, tax-free earnings, and tax-free withdrawals for qualified medical expenses (IRS Publication 969). If you contribute through payroll at work, you generally skip Social Security and Medicare tax on that money too. Our HSA guide covers who it suits.
- A Roth or traditional IRA. You pick the provider and the investments, and you have until the April filing deadline, not including extensions, to contribute for the prior year (IRS Publication 590-A).
- The rest of your 401(k), up to the annual limit.
- Goal accounts. A 529 plan for education, or your child's Trump account.
- A taxable brokerage account. It has no contribution limit and no tax break going in, but you can use the money at any time.
How much can I contribute in 2026?
| Account | Who can use it | 2026 limit |
|---|---|---|
| 401(k) or 403(b) | Employees whose employer offers a plan | $24,500, plus $8,000 if you're 50 or older ($11,250 instead if you turn 60 through 63) |
| Traditional IRA | Anyone with taxable compensation. If you're covered by a workplace plan, the deduction phases out at higher incomes | $7,500, or $8,600 at 50 or older, combined with any Roth IRA |
| Roth IRA | Savers with income below the limits shown below the table | Same combined IRA limit |
| HSA | People covered by a qualifying high-deductible health plan and not enrolled in Medicare | $4,400 self-only or $8,750 family, plus $1,000 at 55 or older |
| 529 plan | Anyone, for a named beneficiary | No annual federal limit. Gift tax rules apply above $19,000 per beneficiary |
| Taxable brokerage | Anyone | None |
Sources: IRS news release IR-2025-111 and Notice 2025-67 for retirement accounts, Publication 969 for HSAs and the IRS 529 questions and answers.
For 2026, if you're covered by a workplace plan, the traditional IRA deduction phases out between $81,000 and $91,000 of modified adjusted gross income for single filers and between $129,000 and $149,000 for married couples filing jointly. Roth IRA contributions phase out between $153,000 and $168,000 for single filers and between $242,000 and $252,000 for joint filers.
How is each account taxed?
| Account | Tax break | Withdrawals | Often fits |
|---|---|---|---|
| Traditional 401(k) or IRA | Now. Contributions reduce taxable income | Taxable. A 10% additional tax generally applies before age 59½ | Higher earners who expect a lower bracket later |
| Roth 401(k) or IRA | Later. No deduction now | Qualified withdrawals are tax-free | Savers who expect the same or a higher bracket later |
| HSA | Now and later | Tax-free for qualified medical expenses. Otherwise taxable, plus a 20% additional tax before age 65 | People who can pay medical bills from cash flow |
| 529 plan | Later. No federal deduction | Earnings are tax-free for qualified education expenses | Parents and grandparents saving for education |
| Taxable brokerage | None | Long-term capital gains are taxed at 0%, 15% or 20% | Goals before retirement, and savings beyond the limits |
Sources: IRS pages on early IRA distributions, early plan distributions, Roth IRAs and capital gains, plus the HSA and 529 sources above.
Roth IRAs also offer some flexibility. Your regular contributions come out first and aren't taxed when you withdraw them (IRS Publication 590-B). Earnings follow stricter rules, so treat it as retirement money, not emergency cash.
Should I choose Roth or traditional?
With traditional contributions, you skip the tax now and pay it when you withdraw. With Roth contributions, you pay the tax now and qualified withdrawals are tax-free. The choice comes down to your tax rate today compared with the rate you expect later.
- Higher bracket now than you expect in retirement: traditional often fits.
- Lower bracket now, such as early in a career or in a low-income year: Roth often fits.
- Not sure: splitting contributions gives you both kinds of money to draw from later.
A Roth 401(k) has no income limit, so it's available even if you earn too much for a Roth IRA. For catch-up contributions, the choice may be made for you. If your 2025 wages from your employer were more than $150,000, your 2026 catch-up contributions generally have to be Roth (Notice 2025-67).
If you already have a large pre-tax balance, a Roth conversion is a separate decision with its own math.
What if I earn too much for a Roth IRA?
You still have options:
- Use the Roth 401(k) if your plan offers one.
- Make a nondeductible traditional IRA contribution and report it on Form 8606 (IRS Publication 590-A). Some people then convert it to a Roth IRA, a move often called a backdoor Roth. If you have other pre-tax IRA money, part of that conversion is generally taxable, so check before you do it.
- Ask whether your 401(k) allows after-tax contributions. If it does, they can fill the room up to the $72,000 overall limit for 2026, before catch-ups. Our mega backdoor Roth guide explains how that works.
What if I'm self-employed?
You can set up your own plan, and the limits can be much higher than an IRA's.
- Solo 401(k). You contribute as the employee, up to $24,500 plus any catch-up, and as the employer, up to 25% of compensation. The combined limit is $72,000 for 2026 before catch-ups (IRS). If you're self-employed, compensation is figured with a special calculation, so the employer amount works out to less than 25% of your net profit.
- SEP IRA. Only employer contributions, which you make as the business owner, up to the lesser of 25% of compensation or $72,000 for 2026 (IRS). You can set one up and fund it as late as your tax return due date, including extensions (IRS Publication 560).
The $24,500 employee limit applies per person, not per plan. If you also contribute at a day job, those contributions count toward the same limit.
Where do 529 plans and Trump accounts fit?
Goal accounts come next. Where they rank for you depends on how soon you'll need the money.
- 529 plans. Contributions aren't deductible on your federal return, but earnings are tax-free when used for qualified education expenses. Texas has no state income tax, so there's no state deduction to factor in. Gifts above $19,000 per beneficiary in 2026 may require a gift tax return, and that amount rises to $20,000 for 2027 (Rev. Proc. 2026-35).
- Trump accounts. Claim the account so your child can receive any free money, such as the $1,000 federal contribution for eligible children born 2025 through 2028. For your own savings, compare it with a 529 first. Our Trump account guide walks through the trade-offs.
What are the 529 and Trump account deadlines?
Unlike IRA and HSA contributions, which can wait until April 2027, these contributions count only for the calendar year you make them.
- 529 plans: December 31 to count for 2026. You can contribute at any time, but each contribution is a gift in the year you make it. To use your 2026 annual exclusion of $19,000 per beneficiary, contribute by December 31. The same applies if you want to spread a large contribution over five years of exclusions, starting with 2026. You make that five-year election on a gift tax return due April 15, 2027 (Form 709 instructions).
- Trump accounts: December 31 to count for 2026. The IRS gives this example: a contribution made on January 31, 2027 is for 2027 and can't be applied to 2026 (Notice 2025-68). You, your family and employers can keep contributing each year through December 31 of the year your child turns 17.
Contributing late in December? Check your plan's processing cutoff.
What are the limits for 2027?
As of November 11, 2026, the IRS hasn't published the 2027 limits for 401(k)s, IRAs or the income phase-outs. Last year's announcement came on November 13. I'd wait for the official notice, not projections, before changing payroll elections.
The 2027 HSA limits are official. They rise to $4,500 for self-only coverage and $9,000 for family coverage (Rev. Proc. 2026-24).
Your account checklist
- Set aside emergency cash and make a plan for high-interest debt
- Find your plan's match formula and vesting schedule, and contribute at least enough to get the full match
- Check whether your health plan qualifies you for an HSA
- Estimate your 2026 income to see whether you qualify for a Roth IRA or a traditional IRA deduction
- Choose Roth or traditional based on your bracket now and later
- Raise your 401(k) contribution before your last paychecks of the year, since it can only come out of pay
- Make IRA and HSA contributions for 2026 by the April 2027 filing deadline
- Claim your child's Trump account, and make any 2026 529 or Trump account contributions by December 31
- Put what's left in a taxable brokerage account
How we help
The right order depends on your tax bracket, your employer's plan and what the money is for. At Mercer Street, we work through that with you in a working session, using your actual numbers. Your accounts stay at your own brokerage.
Mercer Street's work is billed at $600 per hour with a 2-hour minimum ($1,200).
If you'd like help deciding where your next dollar should go, schedule a call.
Frequently asked questions
Which tax-advantaged account should I invest in first?
A common starting order is your 401(k) or 403(b) up to the full employer match, then a health savings account if you have a qualifying high-deductible health plan, then a Roth or traditional IRA, then the rest of your 401(k). After that come goal accounts such as a 529 plan, then a taxable brokerage account. Emergency cash and high-interest debt come before all of them.
How much can I put in a 401(k) and an IRA in 2026?
The 2026 employee contribution limit for 401(k), 403(b) and most 457 plans is $24,500. Workers 50 and older can add $8,000, and those who turn 60 through 63 during the year can add $11,250 instead. The IRA limit is $7,500, or $8,600 at 50 and older, and it covers traditional and Roth IRAs combined.
Should I choose a Roth or a traditional 401(k)?
It depends on your tax rate today compared with the rate you expect when you withdraw the money. Traditional contributions lower your taxable income now and are taxed later. Roth contributions are taxed now and qualified withdrawals are tax-free. If you're in a high bracket today, traditional often fits. In a lower-income year, Roth often fits. Splitting contributions is also an option.
Can I contribute to a Roth IRA if I have a high income?
Direct Roth IRA contributions phase out between $153,000 and $168,000 of modified adjusted gross income for single filers in 2026, and between $242,000 and $252,000 for married couples filing jointly. Above those ranges you can't contribute directly. A Roth 401(k) has no income limit, so check whether your employer's plan offers one.
Should I fund an HSA before an IRA?
Often, if you're eligible. An HSA gives you a deduction when you contribute, tax-free growth and tax-free withdrawals for qualified medical expenses, and payroll contributions generally avoid Social Security and Medicare tax as well. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage. You need a qualifying high-deductible health plan and enough cash to cover the deductible.
What is the deadline to contribute to a 529 plan or Trump account for 2026?
December 31, 2026 for both. Unlike IRA and HSA contributions, these count only for the year you make them. A Trump account contribution made in January 2027 counts for 2027, not 2026. A 529 plan has no federal contribution deadline, but each contribution is a gift in the year you make it. To use the 2026 annual exclusion of $19,000 per beneficiary, contribute by December 31.
This article is for general educational purposes and is not individualized tax, legal, or investment advice. Tax laws change; confirm how current rules apply to your situation before acting.
