Head-to-head · Retirement

401(k) vs Roth IRA

401(k) vs Roth IRA head-to-head: employer match, contribution limits, tax treatment, and the exact order to fund them. Free projection tools included.

Updated April 2026 · 7 min read

100% in-browserNo downloadsNo sign-upMalware-freeHow we keep this safe →

'Should I contribute to my 401(k) or my Roth IRA?' is the most common retirement question online, and the honest answer is 'usually both, in a specific order.' These aren't really competitors — they're complementary accounts with different strengths. The 401(k) wins on contribution limits and employer match; the Roth IRA wins on investment choice, flexibility, and tax-free withdrawals. Knowing which one to fund first is the highest-leverage financial decision most workers make in their career.

Option 1

401(k)

Employer-sponsored, high contribution limit, often includes a match. Usually pre-tax.

Best for

Anyone whose employer offers a match, anyone who wants to shelter large amounts of income from current-year tax, and high earners who are above Roth IRA limits.

Pros

High contribution limit: $23,500/year in 2026, plus $7,500 catch-up if 50+.
Employer match is free money — typically 3–6% of salary, sometimes more.
Contributions come out of pre-tax paycheck — you don't miss what you never see.
Loan option: most plans let you borrow up to $50,000 from your own balance in emergencies.
No income limit to contribute (though highly compensated employees can face 'HCE' rules).

Cons

Investment choices are limited to the plan's menu — often with high fees.
Taxed as ordinary income on withdrawal.
Required minimum distributions start at age 73.
Early withdrawals before 59½ trigger a 10% penalty + income tax (loan is the exception).
You're tied to your employer's plan and administrator — some are great, some are awful.

Option 2

Roth IRA

Individual account, lower limit, any brokerage you like, tax-free withdrawals in retirement.

Best for

Younger workers in lower tax brackets, anyone who wants control over investment choices, and anyone who wants a backup emergency fund via contribution withdrawals.

Pros

Any investment you want — individual stocks, ETFs, index funds, bonds, even crypto via some custodians.
Withdraw contributions anytime, tax- and penalty-free.
No required minimum distributions — grow tax-free forever.
Withdrawals in retirement are 100% tax-free.
You pick the brokerage (Vanguard, Fidelity, Schwab) — typically far lower fees than a 401(k) plan.

Cons

Low contribution limit: $7,000/year in 2026 ($8,000 at 50+).
Income phase-out means high earners can't contribute directly.
No tax deduction today.
No employer match — you're on your own.

The verdict

The canonical funding order for most US workers: (1) 401(k) up to the full employer match — never leave the match on the table, it's usually a 50–100% instant return; (2) Max a Roth IRA to the annual limit for investment flexibility and tax diversification; (3) Back to the 401(k) to hit the annual max; (4) Taxable brokerage beyond that. This order captures free money first, then optimizes for tax treatment, then scales up contribution room.

When to break the canonical order

Skip steps 2-3 if your 401(k) plan has a fantastic fund lineup (low-fee index funds) AND you're in a peak-earning tax bracket — the Traditional 401(k)'s immediate deduction can outweigh the Roth IRA's flexibility. Conversely, skip straight from step 1 to step 4 (taxable) if your 401(k) plan has truly awful funds (ER > 0.75%) and your employer won't let you self-direct — a taxable account with low-cost index funds can beat a high-fee 401(k) over 30 years.

The mega backdoor Roth trick

If your 401(k) plan allows after-tax contributions (distinct from pre-tax or Roth) AND in-service distributions or Roth conversions, you can contribute up to $70,000 total in 2026 and roll the after-tax portion into a Roth IRA. This is the 'mega backdoor Roth' — check with your plan administrator. Few plans allow it, but if yours does, it's one of the most powerful retirement moves available.

Run the numbers yourself

Plug your own inputs into the free tools below — no signup, works in your browser, nothing sent to a server.

Free tool401(k) CalculatorProject your 401(k) balance at retirement. Includes employer match, contribution increases, and realistic market return assumptions.Open tool →Free toolRoth IRA CalculatorEstimate your Roth IRA balance at retirement. Assumes post-tax contributions and tax-free withdrawals in retirement.Open tool →

Frequently asked questions

If my employer doesn't match, should I still fund the 401(k) first?

Usually no — start with the Roth IRA for flexibility and investment choice. Move to the 401(k) only after maxing the Roth, or earlier if the 401(k) has unusually low-fee funds.

Can I contribute to both in the same year?

Yes. The contribution limits are separate. You can contribute up to $23,500 to a 401(k) AND up to $7,000 to a Roth IRA in 2026, provided you're under the Roth income phase-out.

Traditional 401(k) vs Roth 401(k)?

Same rule of thumb as Traditional vs Roth IRA — Roth if you're in a lower tax bracket now than you expect in retirement, Traditional if higher now. Many workers do 50/50 for tax diversification.

What happens to my 401(k) when I leave the job?

You can (1) leave it with the old employer, (2) roll into the new employer's plan, (3) roll into a Traditional IRA, or (4) convert to a Roth IRA (taxable event). Rolling to an IRA usually gives you better investment choices and lower fees.