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The retirement debate that's divided America — settled in 60 seconds.
Choosing between a 401(k) and a Roth IRA is one of the most consequential financial decisions you'll make. Both are tax-advantaged retirement accounts — but they tax you at opposite ends of your career.
A traditional 401(k) reduces your taxable income now: in 2026, you can shelter up to $24,500 ($32,500 if age 50+) from this year's tax bill. Withdrawals in retirement are taxed as ordinary income. If you expect to be in a lower bracket in retirement — or your employer matches contributions — the 401(k) often wins.
A Roth IRA flips the equation: you pay tax today (on up to $7,500 per year, or $8,600 if 50+), then every dollar of growth and every withdrawal in retirement is completely tax-free. If you're young, in a low bracket now, or expect tax rates to rise, Roth wins — often by a wide margin over 30+ years.
The optimal strategy for most people? Capture your full employer match first (that's a 50-100% instant return), then max your Roth IRA, then return to the 401(k). Use our calculator to see your personalised verdict.
Whichever account you pick, the Federal Reserve counts both toward a family's retirement savings: among families holding any retirement account, the median at 35–44 was $45,000 in 2022. Compare your own balance with average retirement savings by age — 401(k) and all-account medians side by side.
It depends on your current vs. future tax rate. If you're in a high bracket now and expect lower income in retirement, 401(k) wins (tax deduction now, pay less tax later).
If you're in a lower bracket now or expect higher rates in retirement, Roth wins (no deduction now, but completely tax-free withdrawals). Most people benefit from using both.
The 2026 401(k) employee contribution limit is $24,500 (up from $23,500 in 2025). If you're 50 or older, you can contribute an additional $8,000 catch-up, for a total of $32,500.
The total limit including employer contributions is $72,000.
For 2026, single filers can contribute the full $7,500 with income under $153,000. Contributions phase out between $153,000 and $168,000.
Above $168,000, you'd need a Backdoor Roth IRA strategy. Married filing jointly: $242,000 to $252,000 phase-out range.
Many employers match your 401(k) contributions up to a percentage of your salary. For example, a 4% match means if you contribute 4% of your salary, your employer adds another 4% — that's 100% free money.
Not taking the full match is literally leaving money on the table.
Yes! You can contribute to both a 401(k) and a Roth IRA in the same year, subject to each account's separate limits.
The optimal strategy for many people is: max employer match in 401(k) → max Roth IRA → return to 401(k) up to the limit.
If your income exceeds Roth IRA limits, you can contribute to a Traditional IRA (no income limit for non-deductible contributions) and then convert it to a Roth. This is legal and widely used by high earners.
Be aware of the pro-rata rule if you have existing Traditional IRA balances.