Somewhere in a benefits portal you haven’t opened in months, your employer is offering you a guaranteed 50 to 200 percent return on your money.
There is a real chance you’re not taking all of it. Roughly one in four people with a match don’t — and almost none of them decided that on purpose. It’s not a knowledge problem. Everyone has heard “max your 401(k).” The advice that’s everywhere is about how much to save.
Almost nobody talks about the part that quietly matters more: the order you fund your accounts in. Same dollars, same accounts, different sequence — and the difference compounds for decades. Get the sequence right and you capture free money and tax advantages most people never collect. Get it wrong and nothing breaks, no alarm sounds; you just leave real money on the table every year, invisibly.
We’ll walk the accounts, the order, and a couple of moves that rarely get discussed — especially if you’re chasing financial independence, an early exit, or just a year where the salary stops on purpose.
A note on numbers: contribution limits and tax brackets change every year. I’m going to teach you the logic, which doesn’t change, and flag where to drop in the current year’s figures. Always check the latest limits before you act — don’t trust a number you read in a blog post, including this one.
The accounts, briefly
Employer 401(k) (or similar). High contribution limits and — the key feature — an employer match. The match can range from 50% of what you put in up to something like 200%, depending on the plan. That is free money, an instant guaranteed return you cannot get anywhere else. Contributions go in pre-tax; you’re taxed on withdrawals in retirement.
Roth IRA. You contribute after-tax dollars, and the money grows and comes out tax-free in retirement. Two underrated features: your original contributions (not the gains) can come out at any time without penalty, and after a five-year seasoning period there’s even more flexibility. FIRE folks exploit this with a “Roth conversion ladder” — moving money in at low tax rates and accessing it years later, tax-free. (More on that in a later post.)
Traditional IRA. Like a 401(k) in spirit — contributions are pre-tax, withdrawals are taxed as ordinary income later. Useful for shifting income out of high-tax years into low-tax ones.
HSA (Health Savings Account). The wild card, and the most misunderstood account in the whole system. More on this below — it deserves its own section.
The order that usually wins
Here’s the sequence that’s right for most people most of the time:
- 401(k) up to the full employer match. Always first. Nothing else comes close to a guaranteed 50-200% return. Leaving match on the table is the single most common, most expensive mistake in personal finance.
- HSA, if you’re eligible. For reasons I’m about to explain, this is arguably the best account in existence — and almost nobody uses it correctly.
- Roth or Traditional IRA, depending on your tax situation. Roughly: if your tax rate is low now and likely higher later (early career, or a deliberately low-income year), favor Roth — pay the low tax now, never pay it again. If your rate is high now and likely lower in retirement, favor Traditional — take the deduction now, pay the lower rate later.
- Back to the 401(k) to fill out the rest of the contribution limit.
- Taxable brokerage for anything beyond that.
The thread running through all of it: pay tax when your rate is lowest. Every one of these decisions is really a bet about whether your tax rate is higher today or in the future. Knowing where you sit on the income curve (see Week 1) is what makes the bet informed instead of random.
I’ll be honest about when this stopped being theory for me. I spent seventeen years as a salaried professional, filling my brackets the way everyone does — wages first, everything taxed on the way through. It wasn’t until our income dropped on purpose that I watched the same accounts start working in reverse, and understood that the sequencing decisions I’d made years earlier were the only reason the low-income years had anything to work with. The order isn’t academic. It’s the setup for a game you may not play until a decade from now.
The HSA: stop using it for healthcare
This is the move I most want you to take away.
When you open an HSA, the custodian hands you a debit card and explains how to pay your doctor’s bills with it. Don’t. Or at least, understand the choice you’re making when you do.
The HSA is the only account with a triple tax advantage: money goes in tax-free, grows tax-free, and — when used for qualified medical expenses — comes out tax-free. No other account does all three. That makes it the most tax-efficient dollar you can possibly save.
So why on earth would you spend it on a copay today? You wouldn’t raid your Roth IRA to cover a prescription. Treat the HSA the same way — as a retirement account that happens to have a medical superpower. Pay today’s medical bills out of pocket, save the receipts, let the HSA grow untouched for decades, and reimburse yourself tax-free much later (there’s no time limit on when you reimburse). You’ve effectively created a second, supercharged retirement account hiding inside your health plan.
Build for flexibility
The deeper goal isn’t to pick the one perfect account. It’s to end up with a mix of pre-tax and post-tax money, so that whatever your income looks like in a given year, you can pull from the right bucket.
In a low-income year — say, the first years of early retirement, or a deliberate sabbatical — you withdraw from pre-tax accounts, because they’ll be taxed at very low rates, sometimes zero. In a high-income year, you pull from post-tax accounts you’ve already paid tax on. Having both gives you a dial to turn. That dial is what makes the truly aggressive tax strategies possible — which is exactly where we’re headed in a couple of weeks.
The accounts are commodities. The order is the edge.
This Friday, the question underneath all of this machinery: you can optimize every account perfectly and still be optimizing toward nothing. What are you building all this for?
Reply and tell me: are you capturing your full employer match? If not, that’s this week’s homework.
Nothing here is personalized financial or tax advice — I’m not your advisor, and the rules are complex and change yearly. Use this to ask better questions, then check the current limits and your own situation before acting.
— Ashleigh