401(k) vs Roth IRA: Where Should Your Money Go First? (2026)

Start saving for retirement in the US and you'll meet two accounts: the 401(k) and the Roth IRA. Both have big tax perks, but "which do I fund first?" stumps a lot of people. There's an order. Here it is, for 2026.

The order, in three lines

1. 401(k) up to the employer match — the match is free money, so grab it first.
2. Max your Roth IRA — flexible investing + tax-free withdrawals in retirement.
3. Back to the 401(k), up to the max, with anything left.

401(k) — pay tax later

• Workplace retirement plan. Contributions are pre-tax, cutting your taxable income now.
• 2026 limit $24,500 ($8,000 extra if 50+).
• The employer match is the point — e.g., up to 6% of pay. That's an instant 100% return; always capture it.
• You pay income tax when you withdraw in retirement (tax deferred, not avoided).

Roth IRA — pay tax now

• Funded with after-tax dollars. No break today, but growth and retirement withdrawals are entirely tax-free.
• 2026 limit $7,500 ($1,100 extra if 50+).
• Income limits — for 2026, single filers phase out between MAGI $153,000–$168,000 (none above); married filing jointly $242,000–$252,000.
• You open it yourself, so investment choice is wide open.

Which wins — it's about tax timing

The core question is "your tax rate now vs. in retirement."

• Lower income/rate now (early career) → paying tax now via Roth often wins; decades of tax-free growth compound.
• Higher income/rate now → the pre-tax 401(k) deduction saves more today.
• Using both diversifies your tax — the safest play.

FAQ

Can I fund both a 401(k) and an IRA?

Yes — separate limits. You can max the 401(k) at $24,500 and the IRA at $7,500.

What if my income is too high for a Roth IRA?

A Roth 401(k) at work has no income limit. There's also the "backdoor Roth" (consider professional advice).

Does no employer match change the order?

Without a match, funding the flexible Roth IRA first, then the 401(k), can make sense.

Order: match → Roth IRA → max the 401(k). Lean Roth when your rate is low, 401(k) when it's high.

This is general 2026 information, not investment or tax advice. Limits and income thresholds change yearly and depend on your situation — consult a professional.