Choosing between a Roth IRA and a 401(k) is one of the most important decisions you'll make for your retirement. The good news? You don't have to choose just one—many people use both. Here's everything you need to know to make the right choice.
Quick Comparison: Roth IRA vs 401(k)
| Feature | Roth IRA | Traditional 401(k) |
|---|---|---|
| 2026 Contribution Limit | $7,000 ($8,000 if 50+) | $23,500 ($31,000 if 50+) |
| Tax Treatment | After-tax contributions, tax-free growth and withdrawals | Pre-tax contributions, taxed on withdrawal |
| Employer Match | No | Yes (if offered) |
| Income Limits | Yes ($161K single, $240K married) | No |
| Required Distributions | None during your lifetime | Starts at age 73 |
| Investment Options | Unlimited (you choose) | Limited to plan options |
What Is a 401(k)?
A 401(k) is an employer-sponsored retirement savings plan. You contribute pre-tax dollars directly from your paycheck, reducing your taxable income today. The money grows tax-deferred, and you pay taxes when you withdraw in retirement.
Key Features of 401(k)
- Employer match: Many employers match a percentage of your contributions—this is essentially free money
- High contribution limits: $23,500 in 2026 ($31,000 if you're 50+)
- Automatic payroll deductions: Easy to "set and forget"
- Pre-tax contributions: Lowers your current tax bill
What Is a Roth IRA?
A Roth IRA is an individual retirement account you open yourself. You contribute after-tax dollars (no upfront tax break), but your money grows completely tax-free, and withdrawals in retirement are tax-free.
Key Features of Roth IRA
- Tax-free growth: Never pay taxes on gains or withdrawals
- No required minimum distributions: Keep the money growing as long as you want
- Flexible withdrawals: Access contributions anytime without penalty
- Investment freedom: Choose from any stock, bond, ETF, or mutual fund
💹 Calculate Your 401(k) Growth
See how much your 401(k) will grow with employer matching
Try 401(k) Calculator →When to Choose a 401(k)
💹 Choose 401(k) If:
- Your employer offers matching contributions
- You're in a high tax bracket now
- You want to maximize retirement savings
- You prefer automated payroll deductions
- Your income exceeds Roth IRA limits
🌱 Choose Roth IRA If:
- You expect higher taxes in retirement
- You're in a lower tax bracket now
- You want tax-free income in retirement
- You want more investment options
- You value flexibility to access contributions
The Best Strategy: Use Both!
Here's the optimal approach most financial experts recommend:
- First: Contribute to your 401(k) up to the employer match (free money!)
- Second: Max out your Roth IRA ($7,000 in 2026)
- Third: Go back and max out your 401(k) ($23,500 in 2026)
💡 Example: Maximizing Both
If your employer matches 50% up to 6% of your salary on a $75,000 income:
• 401(k) to match: $4,500/year (you get $2,250 free!)
• Roth IRA max: $7,000/year
• Remaining 401(k): Up to $19,000/year
Total retirement savings: Up to $32,750/year
Roth 401(k): The Best of Both Worlds?
Many employers now offer a Roth 401(k) option, which combines features of both:
- High contribution limits like a traditional 401(k) ($23,500)
- After-tax contributions like a Roth IRA
- Tax-free withdrawals in retirement
- Employer match (but match goes into pre-tax account)
If your employer offers a Roth 401(k), you can contribute all $23,500 in after-tax dollars while still getting any employer match.
Income Limits for Roth IRA (2026)
The Roth IRA has income limits that may affect your eligibility:
| Filing Status | Full Contribution | Reduced Contribution | Not Eligible |
|---|---|---|---|
| Single | Under $146,000 | $146,000 - $161,000 | Over $161,000 |
| Married Filing Jointly | Under $230,000 | $230,000 - $240,000 | Over $240,000 |
If you exceed these limits, you can still use the Backdoor Roth IRA strategy: contribute to a Traditional IRA and then convert it to a Roth.
The Bottom Line
There's no single "right" answer—the best choice depends on your tax situation, income, and retirement goals. Here's a quick summary:
- Always get the 401(k) match first—it's literally free money
- Young and low income? Prioritize Roth (you'll thank yourself later)
- High income? Max out 401(k), then backdoor Roth
- Ideally? Use both for tax diversification in retirement