Key takeaways

• A Roth IRA is an individual retirement account funded with after-tax dollars, meaning qualified withdrawals are free of federal income tax.
• A 401(k) is a workplace plan that generally allows pre-tax and Roth payroll contributions.
• 401(k)s offer higher contribution limits and may include employer matching, while Roth IRAs typically offer more investment choice and control.

Both Roth IRAs and 401(k)s offer tax-advantaged ways to build a financially secure retirement. On average, Americans have $350,943 put away in 401(k)s, with an additional $106,073 saved in Roth IRAs.

Roth IRAs and 401(k)s differ in contribution and income limits, withdrawal rules, and features such as employer matching and investment flexibility. Learn more about how these accounts compare and whether a Roth IRA or 401(k), or both, may fit into your retirement strategy.

Roth IRA vs. 401(k): Key differences

Roth IRAs and 401(k) plans offer unique advantages that can help grow your retirement fund, including potential tax savings and the ability to invest your contributions.

Roth IRA and 401(k) taxes

Roth IRAs and 401(k)s can both offer tax advantages, including:

• Roth IRAs: Tax benefits are delayed until retirement. Contributions enjoy federal tax-free investment growth potential and qualified withdrawals of earnings will be tax-free. Because Roth contributions are made after-tax, they can be withdrawn at any time tax-free.
• 401(k)s: Pre-tax 401(k) contributions generally reduce current federal taxable income. From there, your investments can potentially grow tax-deferred and withdrawals are generally taxed as ordinary income in retirement. Roth 401(k) contributions have a similar tax treatment as Roth IRA contributions, and tax-free withdrawals can typically begin at age 59½.

Making pre-tax contributions to a 401(k) may benefit those who expect their tax rate to be lower in retirement. However, using a Roth IRA or making Roth 401(k) contributions may be ideal for those aiming to lower their taxes in retirement.

Read more: Should you choose Roth or traditional 401(k) contributions?

2026 contribution and income limits

Both 401(k)s and Roth IRAs have limits on how much can be contributed each year. They also offer additional catch-up contributions to those above certain ages, though income limits can impact Roth IRA contribution limits.

401(k) and Roth IRA contribution limits

401(k)s have higher annual contribution amounts than Roth IRAs, and they allow employers to make matching contributions. Through what is a called "salary deferral," employees can contribute a portion of their salary to their 401(k) — up to a certain limit.

Beginning in 2026, certain higher-paid participants must make catch-up contributions to their 401(k) on a Roth basis.

These are the 401(k) and Roth IRA contribution limits for 2026:

Employer contributions to a 401(k) do not count toward the employee deferral limit. Instead, a separate annual-additions limit applies, which is generally the lesser of:

• $72,000 in 2026 (excluding qualifying catch-up contributions), or
• 100% of their compensation.

Contributions made by employers may also be subject to non-discrimination testing and a vesting period, depending on their plan. Although employees always have ownership of their own 401(k) contributions, they may not have immediate access to employer contributions.

Roth IRA income limits

Roth IRAs, unlike 401(k)s, are subject to income limits that determine whether a full contribution, reduced contribution, or no direct contribution can be made. These limits depend on the contributor's modified adjusted gross income (MAGI) and filing status.

These are the income limits for Roth IRAs for 2026:

Those whose income is above the Roth IRA income limits may be able to use a strategy commonly called a backdoor Roth IRA. This generally involves making a nondeductible traditional IRA contribution and converting it to a Roth IRA; tax consequences can vary based on individual circumstances and other IRA assets.

Investment options, fees, and account control

Roth IRAs typically offer a wider range of investment options than 401(k)s as Roth IRAs are not limited to the selections offered by employers. Typically, contributions to either retirement account can be invested in securities and funds. With IRAs, investment options depend on the financial institution where the account is opened. Most 401(k) plans also allow contributions to be invested, though investment options are limited to those selected by employers.

Read more: What should I consider when picking my 401(k) investments?

Withdrawal rules and RMDs

Roth IRAs have several benefits when it comes to withdrawals and required minimum distributions (RMDs):

• Contributions can be withdrawn at any time tax- and penalty-free.
• Roth IRAs are not subject to required minimum distributions (RMDs) during the owner’s lifetime.

RMDs from pre-tax retirement accounts generally begin at age 73 under current law, although the applicable RMD age depends on the individual’s date of birth. For these reasons, Roth IRAs can offer a level of flexibility not found in traditional 401(k)s.

401(k)s have their own withdrawal rules and RMDs, which can differ slightly between pre-tax and Roth contributions:

• Penalty-free withdrawals of contributions and investment earnings can typically begin at age 59½. One exception is the Rule of 55, which allows for early withdrawals if an employee leaves their job during or after the year they turn age 55.
• 401(k)s that hold pre-tax amounts are typically subject to RMDs, which generally begin when the account holder turns age 73. RMDs do not apply to Roth amounts held in a 401(k) plan. Some 401(k) holders can delay taking RMDs if they are working beyond age 73 and do not own more than 5% of the company they work for.
• All withdrawals of pre-tax amounts, including RMDs, are taxed as ordinary income. Qualified withdrawals of Roth contributions and earnings are generally tax-free in retirement.

Which should you fund first, and can you use both?

When possible, contributing to both a 401(k) and a Roth IRA is one way to put even more money away in tax-advantaged retirement accounts. For eligible low- and moderate-income savers, contributions to an IRA, 401(k), or both, may also qualify for the Saver’s Credit, which can add to the tax benefits of saving for retirement.

If your employer offers a 401(k) match, consider contributing enough to receive the full match before funding an IRA. Once you’ve taken full advantage of any employer matches, the choice of whether to contribute to a Roth IRA or 401(k), or both, comes down to differences in income limits, taxes, and investment options.

Roth IRA vs. 401(k) FAQs

Where can I open a Roth IRA?

Roth IRAs can be opened through providers such as banks, brokerage firms, and other eligible financial institutions. Each provider may offer different account features and investment options, which may be worth comparing before opening an account. There may also be various opening requirements, fees, and account or investment minimums depending on the provider.

Read more: How to open an IRA

Can I roll my 401(k) into a Roth IRA?

Rolling over a 401(k) into a Roth IRA is possible when certain requirements are met. Some 401(k) plans may allow rollovers during employment, but others may require waiting until you leave or change jobs.

Rollovers of pre-tax 401(k) amounts to Roth accounts are considered a Roth conversion. You'll pay income taxes on the amount rolled over, but qualified withdrawals from the Roth IRA will be tax free.

Rollovers from Roth 401(k)s to Roth IRAs follow different rules. Roth contributions can be rolled over without triggering income taxes, but earnings on these contributions may be subject to the five-year rule. It may also be beneficial to check whether employer contributions have been made on a Roth or pre-tax basis.

What happens if I contribute too much to my 401(k)?

If your pre-tax 401(k) contributions exceed the annual limit, then any excess amounts will be subject to double taxation unless corrected. Excess deferrals are included in your taxable income for the year contributed, then are taxed a second time when they are later distributed from your plan. If you suspect that you've over-contributed to your 401(k), reach out to your plan provider as soon as possible. You can request that they return any excess amounts to you by April 15 of the following year, the tax filing deadline, to avoid double taxation.¹

Can a nonworking spouse contribute to a Roth IRA?

Yes, married couples can open a spousal IRA for a nonworking spouse. By filing jointly, a spouse without taxable compensation can make Roth contributions to an IRA in their own name. However, if a working spouse's income is too high, then this can impact how much can be contributed.