401k vs Roth IRA: Which Should You Choose?
Published Apr 13, 2026 · 6 min read
Both the 401(k) and Roth IRA help you save for retirement, but they work in opposite ways. Choosing the right one depends on one question: will your tax rate be higher now or in retirement?
The Core Difference
| Traditional 401(k) | Roth IRA | |
|---|---|---|
| Tax on contributions | Deducted pre-tax | Paid with after-tax dollars |
| Tax on growth | Tax-deferred | Tax-free |
| Tax on withdrawal | Taxed as income | Tax-free after 59Β½ |
| 2026 contribution limit | $23,500 | $7,000 ($8,000 if 50+) |
| Employer match | Yes | No |
| Income limit | None | $161,000 MAGI (single) |
When to Choose 401(k)
- Your employer offers matching (always take the full match first)
- You're in a high tax bracket now (25%+) and expect lower taxes in retirement
- You want to reduce this year's taxable income
When to Choose Roth IRA
- You're in a low tax bracket now and expect higher income later
- You're young and have decades of tax-free growth ahead
- You want flexibility β contributions (not gains) can be withdrawn anytime
The Best Strategy: Do Both
The optimal approach for most people: contribute enough to your 401(k) to get the full employer match, then max out a Roth IRA, then go back and max the 401(k) if you have more to invest.
Try it: Use our 401k Calculator and Roth IRA Calculator to compare projected balances at retirement.