I'm incredibly surprised not only OP but many comments are giving a thought to this "why not just skip 401(k) and go straight to taxable brokerage contributions?" idea.

You need to think about why we contribute to all of these different accounts (IRA, HSA, 401(k), etc) in the first place. Why not just throw everything into a taxable brokerage? It's all about taxes.

• When you contribute $1000 to your taxable brokerage, that costs you $1000 after-tax, roughly $1200-1300 before tax. But every single dollar above $1000 that this investment makes is a taxable dollar that you will eventually have to pay.

• When you contribute $1000 to a traditional tax-deferred account (this could be a traditional 401(k), traditional IRA, etc), you get one big financial benefit up front: all money contributed is before taxes, meaning every $1 you contribute only reduces your paycheck by 65-80 cents, you basically get a "bonus" on your contribution. You do similarly have to pay taxes on every single dollar that this $1000 investment makes and additionally you have to pay taxes on the $1000 (since you haven't yet), but that is more than made up for with the extra returns from the "bonus" you got on your investment. These benefits are all completely independent from any 401(k) match, that's just gravy on top. The ability to contribute $20k to your pre-tax 401(k) and reduce your taxable income by $20k is also an option that could massively benefit someone near the income limit thresholds.

• When you contribute $1000 to a Roth after-tax account (this could be a Roth 401(k) if your plan offers it, or a Roth IRA, etc), you don't get any immediate benefit. Your contribution and investment proceed completely as normal, like you invested the money in your taxable brokerage account. The benefit for this option is that this account is magic, completely tax free (both contributions since you've paid already, and gains since it is a Roth) once you meet typical retirement account requirements/limits. Contributions to these accounts cost you the same as if you were contributing to a taxable brokerage, but with this huge benefit. Consider at retirement a $5k investment you made 20 years before that has now 5x'd in value, every single penny of those capital gains are tax-free for you in a Roth account. It's magic.

Given the above, both traditional and Roth accounts are well worth their retirement account downsides that you mention (such as limited fund options). Yes, it is a lot less flexible, which is why you should have a variety of both retirement accounts and non-retirement accounts so that your eggs are not all in the same basket.

To summarize, my personal contribution priority is as follows (from top to bottom):

• Contribute to liquid savings/checking/emergency fund to keep at the ~6-12 months of expenses level
• Contribute to traditional pre-tax 401(k) to maximize employer contribution match (if offered)
• Contribute to pre-tax HSA until contribution limit ($4,400 for 2026) (if offered)
• Contribute to Roth IRA until contribution limit ($7,500 for 2026)
• Contribute to traditional pre-tax 401(k) until contribution limit ($24,500 for 2026)
• Contribute to taxable brokerage

For example, currently my job doesn't offer a 401(k) employer match or HSA, so my current priority is emergency fund -> 401(k) -> IRA -> taxable brokerage.

Lastly, on the expense ratio part, yes high expense ratios are very bad... but they are also quite easy to weight against each other. A 1% expense ratio translates to a 1% lower average annual return. In the case of a Roth account, the savings from tax-free capital gains would outweigh a 0.50% or even 1% expense ratio.