In what order should most people invest in retirement accounts?

The most effective investment order for retirement accounts typically begins with contributing to a Roth IRA, followed by a 401(k) up to the employer match, and then maximizing contributions to the 401(k). This strategy harnesses the benefits of each type of account effectively.

Starting with a Roth IRA is advantageous because contributions are made with after-tax dollars, allowing for tax-free growth and tax-free withdrawals in retirement. This is especially beneficial for younger investors who expect to be in a higher tax bracket later in life.

Next, contributing to a 401(k) up to the employer match is crucial because it represents free money from the employer. It's essential to take full advantage of this benefit before moving on to other investments.

Finally, maxing out a 401(k) is wise once the previous contributions have been maximized. This account offers higher contribution limits than a Roth IRA and can significantly enhance retirement savings, especially if an employer provides matching contributions.

This order effectively maximizes retirement savings by ensuring that individuals leverage both the tax benefits of a Roth IRA and the employer match in a 401(k) plan. Consequently, this investment strategy ensures a balanced approach to retiring comfortably.