Tax-free growth and retirement withdrawals with after-tax contributions and no RMDs.
Younger workers and those expecting higher retirement tax rates
Employer-sponsored retirement plan with tax-deferred growth and potential employer matching.
Those with employer match and high current income
A 401(k) is an employer-sponsored retirement plan with a $23,000 annual contribution limit and pre-tax contributions. A Roth IRA is an individual account with a $7,000 limit and after-tax contributions — withdrawals are tax-free. Many experts recommend contributing to both.
Contribute to your 401(k) at least up to the employer match, then max your Roth IRA. If income exceeds Roth limits, use the 401(k) fully.
Choose Roth IRA if
Younger workers and those expecting higher retirement tax rates
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| Metric | Roth IRA | 401(k) | Diff |
|---|---|---|---|
| Annual Contribution Limit(USD) | $7,000 | $23,000 | -70% |
| 2026 Contribution Limit (Under 50)(USD) | $7,500 | — | — |
| 2026 Contribution Limit (Age 50+)(USD) | $8,600 ($7,500 + $1,100 catch-up) | — | — |
| Early Withdrawal Penalty on Earnings(%) |
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Choose 401(k) if
Those with employer match and high current income
| 10% penalty + tax on earnings (before 5-year rule) |
| — |
| — |
| Income Limit Phase-Out (Single, 2026)(USD) | ~$146,000-$161,000 | — | — |
| Ideal Investment Time Horizon(years) | 20+ years (younger investors) | — | — |
| 2026 Catch-Up Contribution (Age 50+)(USD) | $8,000 | $8,000 | — |
| Maximum Total Contribution (Age 50+, 2026)(USD) | $32,500 | $32,500 | — |
| RMD Start Age (2026)(years) | 73 | 73 | — |
| 2026 Annual Contribution Limit (Under 50)(USD) | $24,500 | $24,500 | — |
All figures sourced from publicly available data. Last updated May 2026.
Roth IRA
$7,000
401(k)
$23,000🏆
Roth IRA
After-tax (tax-free withdrawals)
401(k)
Pre-tax (taxed on withdrawal)
Roth IRA
No
401(k)
Yes (free money)🏆
Roth IRA
No🏆
401(k)
Yes (at age 73)
Roth IRA
Yes ($146K+)
401(k)
No🏆
Most advisors recommend: first contribute to 401(k) up to the employer match, then max the Roth IRA. If you can save more, go back to the 401(k).
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| Attribute | Roth IRA | 401(k) |
|---|---|---|
| Annual Contribution Limit(USD) | $7,000 | $23,000 |
| Tax on Withdrawal | None (tax-free) | Ordinary income tax |
| Immediate Tax Deduction Available | No | — |
| Tax-Free Qualified Withdrawals | Yes (5-year rule, age 59½+) | — |
| Employer Match Available | No | Yes (typically 3-6% match) |
| Employer Match Availability | Typically 3-6% of salary | — |
| 2026 Contribution Limit (Under 50)(USD) | $7,500 | — |
| 2026 Contribution Limit (Age 50+)(USD) | $8,600 ($7,500 + $1,100 catch-up) | — |
| Required Minimum Distributions (RMD) | None during lifetime | — |
| Early Withdrawal Penalty on Earnings(%) | 10% penalty + tax on earnings (before 5-year rule) | — |
| Contribution Penalty-Free Withdrawal | Yes, anytime penalty-free | — |
| Income Limit Phase-Out (Single, 2026)(USD) | ~$146,000-$161,000 | — |
| Traditional IRA Deduction Phase-Out (Single, 2026)(USD) | No limit | — |
| 5-Year Holding Period Required | Yes (for tax-free earnings withdrawal) | — |
| Best Tax Bracket for Contribution | Lower current bracket, higher future bracket | — |
| Ideal Investment Time Horizon(years) | 20+ years (younger investors) | — |
| Estate Planning Flexibility | Heirs receive tax-free distributions (SECURE Act rules apply) | — |
| 2026 Catch-Up Contribution (Age 50+)(USD) | $8,000 | — |
| Maximum Total Contribution (Age 50+, 2026)(USD) | $32,500 | — |
| 2026 Annual Contribution Limit (Under 50)(USD) | $24,500 | — |
| Investment Choice Variety | Limited (plan-specific) | — |
| RMD Start Age (2026)(years) | 73 | — |
| Early Withdrawal Exceptions | Limited (CARES Act, hardship) | — |
| Account Loans Available | Yes, up to 50% or $50k | — |
| Roth Option Availability | Roth 401(k) | — |
| Administrative Responsibility | Employer-managed | — |
| Fee Structure | Higher due to plan administration | — |
Side-by-side comparison of numeric attributes