Reasonable Prioritizations Of Accounts

Scope And Purpose Of This Post

This post talks about reasonable prioritizations for putting your money into various accounts (401k, IRA, HSA, tax-normal brokerage, etc).  I will try to add on to what the Bogleheads wiki and /r/PersonalFinance wiki have already said on the matter.

Sections:

• A Baseline Ordering
• A Possible Ordering When Saving For A House
• Explanation Of Terms/Accounts
• Overall Reasoning Of Baseline Ordering
• How Does Employee Stock Purchase Plan (ESPP) Fit In?
• Why Traditional Over Roth?
• What About Saving For A House Or Something Else Before Retirement?
• Can I Eliminate My Emergency Fund?

A Baseline Ordering

Vanilla: exotic spice but default flavor.

To give you something notable right away, here is a reasonable ordering for putting money into various accounts if you are mostly looking to save for retirement or other long-term goals:

• Pay down high-interest debt.
• Build up an emergency fund (savings/checking account, able to cover 3-6 months of expenses).
• Max out ESPP contributions and sell shares immediately.
• Contribute to your Traditional 401k enough to get the full match from your employer.
• Max out HSA contributions.
• Max out Traditional 401k contributions.
• Max out Roth IRA contributions (and Mega Backdoor Roth contributions to your 401k if your 401k supports it).
  
• Contribute to a taxable (normal) account.

Note: this ordering also assumes that your 401k doesn't have ridiculously high fees and that you have too much income to be eligible for making tax-deductible contributions to a Traditional IRA.  Even if your income is too high to be eligible for contributing to a Roth IRA, you can make non-tax-deductible contributions to a Traditional IRA and then Roth-convert that money so that you end up with Roth IRA money.

I will explain the terms/accounts and reasoning in the sections below.