There’s some good news during the coronavirus pandemic: A recent survey by Schwab indicates the average amount 401(k) plan participants contributed to their accounts this year is up 20% compared with last year. 

Investing more for retirement is always smart. And those Americans who increased account contributions during the coronavirus-driven market crash made an especially prudent choice since market downturns often present buying opportunities.

But this good news is tempered by the fact that putting more money into a 401(k) isn’t necessarily always the best way to save more for retirement. For some Americans, there are far better choices. 

Colorful 401(k) letters sitting next to piggy bank.

Image source: Getty Images.

Why extra 401(k) contributions aren’t necessarily the right move

For employees offered a workplace 401(k) with an employer match, contributing at least enough to secure company-provided funds is the smartest course of action. Employer 401(k) contributions are free money to live on in retirement. 

But once you’ve maxed out your match, think seriously about whether increasing 401(k) contributions is the ideal next step. You may be better off diverting some of your additional capital to other tax-advantaged accounts, like a traditional or Roth IRA or a health savings account (HSA). Most people can’t afford to make hefty contributions to all these types of accounts, and some of the others provide significant advantages that 401(k)s don’t. 

HSAs, for example, offer a triple tax benefit for those eligible for one. You can contribute with pre-tax dollars, enjoy tax-free gains if you invest the funds, and make tax-free withdrawals when the money is used for qualifying medical expenses. While HSAs may not appear at first glance to be a retirement account, they can serve as one because so many seniors incur substantial medical expenses. HSAs provide a big pot of money to cover these costs without owing taxes on account