Roth IRA vs 401(k) for 2026: contribution limits, tax treatment, employer match, income limits and the order most people fund them in.
A 401(k) is a workplace retirement plan; a Roth IRA is an individual account you open yourself. Both let investments grow without annual tax, and most people who can use both should. The question is the order, and the answer usually starts with free money from an employer.
Employees can defer up to $24,500 into a 401(k) in 2026, plus catch-up contributions from age 50. The IRA limit is $7,500, plus a catch-up from age 50. Roth IRA contributions phase out between $153,000 and $168,000 of modified adjusted gross income for single filers and $242,000 to $252,000 for married couples filing jointly. Check the IRS pages for catch-up amounts and any changes.
1) Contribute to the 401(k) at least up to the full employer match — a 50% or 100% match is an immediate return you cannot get elsewhere. 2) Fund a Roth IRA, if your income allows, for its flexibility and wider investment choice. 3) Go back to the 401(k) toward the annual limit. Paying off high-interest debt and holding an emergency fund usually come before step 2.
Traditional 401(k) contributions reduce your taxable income now and are taxed when withdrawn. Roth contributions (in a Roth IRA or a Roth 401(k)) are made with taxed money, and qualified withdrawals in retirement are tax-free. The choice is a bet on whether your tax rate is higher now or later. Early in a career, when income and tax rates are lower, Roth contributions often make sense; in peak earning years, traditional contributions often do.
Roth IRA contributions (not earnings) can be withdrawn at any time without tax or penalty, and Roth IRAs have no required minimum distributions during the owner's lifetime. 401(k) money is generally locked until 59½ except through loans or specific exceptions, and may offer a narrower menu of funds, sometimes with higher fees.
Many plans now offer a Roth 401(k) option with no income limit. Some people make non-deductible traditional IRA contributions and convert them (a "backdoor Roth"), which has tax traps if you hold other pre-tax IRA money — worth a tax professional's review.
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.