Key Takeaway: Optimal order: 401(k) match → Max Roth IRA ($7K) → Max 401(k) ($23.5K). If tax rate is low now, prioritize Roth.
The Ultimate Comparison
Both are powerful — but they work differently. Understanding when to use each saves tens of thousands in taxes.
Key Differences
401(k): • $23,500 limit (2026) • Pre-tax contributions • Taxed on withdrawal • Employer match available • Required distributions at 73 Roth IRA: • $7,000 limit (2026) • After-tax contributions • TAX-FREE withdrawals • No employer match • NO required distributions
The Optimal Order
Step 1: 401(k) up to employer match (FREE money) Step 2: Max Roth IRA ($7,000) Step 3: Max remaining 401(k) Step 4: Taxable brokerage
The Tax Math
Investing $7,000/year for 30 years at 8%: 401(k): Grows to $793K → After 22% tax = $618,540 Roth IRA: Grows to $793K → After tax = $793,000 Roth gives you $174,460 MORE in retirement!