401(k) vs IRA vs Roth IRA: How They Differ

The short version

A 401(k) is a retirement plan your employer runs. Your contribution comes straight out of your paycheck, and many employers add a match. An IRA, an individual retirement arrangement, is an account you open on your own at a bank or brokerage. Anyone with taxable compensation can put money in, job plan or not.

Roth describes when you pay income tax. With a traditional account you usually get the tax break now and pay tax on withdrawals later. With a Roth account you pay the tax now, and qualified withdrawals later, growth included, are tax free. That gives you four common versions: traditional 401(k), Roth 401(k), traditional IRA and Roth IRA. This guide compares the 401(k) with the two IRAs, because that is where the rules differ most.

Side by side for 2026

	401(k)	Traditional IRA	Roth IRA
Who opens it	Your employer	You	You
Your 2026 limit	$24,500	$7,500, shared with the Roth IRA	$7,500, shared with the traditional IRA
Catch-up from age 50	$8,000, or $11,250 at ages 60 to 63	$1,100	$1,100
Employer money	Often a match, counted toward a separate $72,000 total	None	None
Income limit to contribute	None	None, but the deduction phases out if you have a workplace plan	Yes, phases out from $153,000 for single filers
Tax on contributions	Pre-tax, or after tax if you pick the Roth option	Deductible if you qualify	Not deductible
Tax on qualified withdrawals	Taxed as income (Roth option: tax free)	Deductible money and earnings are taxed	Tax free
Required minimum distributions	From age 73 (none on Roth money in the plan while you are alive)	From age 73	None while the original owner is alive

All figures are for 2026 and come from the IRS release of November 13, 2025 and the IRS pages listed at the end. The IRS adjusts most of them for inflation each year.

The 2026 contribution limits

For 2026 you can put up to $24,500 of your own pay into a 401(k), up from $23,500 in 2025. From the year you turn 50 you can add a catch-up of $8,000. In the years you turn 60, 61, 62 or 63 the catch-up is $11,250 instead. Traditional and Roth 401(k) money share the same limit: it applies to you as a person, not to each plan.

Your employer's match does not use up your $24,500. It counts toward a separate total for you and your employer together of $72,000 for 2026, with catch-up money on top. The 401(k) calculator applies all of these limits by age, shows how much of your balance comes from the match, and warns you when your contribution rate would hit the cap.

For IRAs the 2026 limit is $7,500, up from $7,000, plus a $1,100 catch-up from age 50, so $8,600 in total. This is one limit for all your IRAs together. Put $4,000 in a Roth IRA and you have $3,500 left for a traditional IRA, not another $7,500. You also cannot contribute more than your taxable compensation for the year. If you file jointly, a spouse without earnings can still contribute based on the other spouse's pay.

Most you can save from your pay in 2026, under 50

$24,500 + $7,500 = $32,000

Age 50 to 59, or 64 and older

$32,500 + $8,600 = $41,100

Age 60 to 63

$35,750 + $8,600 = $44,350

Those totals assume your Roth IRA contribution is not cut by the income limits below, and they leave out the employer match.

Roth IRA income limits for 2026

A Roth IRA is the only one of the three with an income cap on contributing. The IRS measures it with your modified adjusted gross income (MAGI). Below the range you can contribute the full amount. Inside the range the amount you may contribute shrinks. Above it you cannot contribute to a Roth IRA directly.

Filing status	2026 Roth IRA phase-out range (MAGI)
Single or head of household	$153,000 to $168,000
Married filing jointly	$242,000 to $252,000
Married filing separately	$0 to $10,000

For comparison, the 2025 ranges were $150,000 to $165,000 for single filers and $236,000 to $246,000 for joint filers. The Roth option inside a 401(k) has no income limit at all, so a high earner whose plan offers it can still put Roth money aside at work.

When a traditional IRA contribution is deductible

Anyone with compensation can put money into a traditional IRA. Whether you can deduct it depends on two things: whether you or your spouse are covered by a retirement plan at work, and your income. If neither of you is covered, the deduction is allowed in full at any income. If one of you is covered, it phases out over these 2026 ranges:

Your situation	2026 phase-out range (MAGI)
Single or head of household, covered by a workplace plan	$81,000 to $91,000
Married filing jointly, the contributing spouse is covered	$129,000 to $149,000
Married filing jointly, you are not covered but your spouse is	$242,000 to $252,000
Married filing separately, covered by a workplace plan	$0 to $10,000

Example: you are single, your job has a 401(k) you take part in, and your MAGI is $100,000. That is above the $91,000 top of the range, so a traditional IRA contribution gives you no deduction in 2026. The same $100,000 is well under the $153,000 start of the Roth IRA range, so you can put the full $7,500 into a Roth IRA. If your MAGI were $70,000, below $81,000, the traditional IRA contribution would be fully deductible, and you would get to choose. The exact partial amounts inside a range are worked out with the worksheets in IRS Publication 590-A.

Traditional or Roth: tax now or tax later

The choice between traditional and Roth comes down to your tax rate today against your tax rate when you withdraw. If the two rates are the same, both end up with the same money. Take $10,000 of pay, a 25% tax rate at both ends, and investments that double:

Traditional: the full $10,000 goes in, grows to $20,000, and 25% tax on the withdrawal leaves $15,000.
Roth: you pay $2,500 of tax first, $7,500 goes in and grows to $15,000, and the qualified withdrawal is tax free.

Same result, because multiplying by 2 and then by 0.75 is the same as multiplying by 0.75 and then by 2. The difference only appears when the rates differ. If you expect a lower tax rate in retirement than today, traditional comes out ahead. If you expect a higher one, Roth does. Nobody knows future tax rates, which is one reason people split their savings between the two.

Two rules can make the choice for you. If your income is above the Roth IRA range, the Roth IRA is closed but a Roth 401(k) is not. And starting in 2026, if your wages from your employer were over $150,000 the year before, your 401(k) catch-up contributions must go in as Roth. Your regular contributions can stay traditional. The paycheck calculator shows how a pre-tax 401(k) contribution lowers the federal income tax on each check, while Social Security and Medicare are still taken from that money.

Getting the money out

All three accounts are meant for retirement, and the tax code enforces it. Take money out before age 59½ and you generally owe an additional 10% tax on top of any income tax, unless an exception applies. A few exceptions only exist for one type of account:

Leaving your job in or after the year you turn 55: an exception for a 401(k), not for an IRA.
A first-time home purchase, up to $10,000: an exception for IRAs, not for a 401(k).
Qualified higher education expenses: an exception for IRAs, not for a 401(k).

For a Roth withdrawal to be completely tax free it has to be a qualified distribution. According to the IRS Roth comparison chart, that means the account has been held for at least 5 years and the withdrawal is made on or after age 59½, because of disability, or after death. A Roth IRA also allows a qualified distribution for a first-time home purchase. Other Roth withdrawals may be partly taxable.

Required minimum distributions

Traditional money cannot stay sheltered forever. You generally have to start taking required minimum distributions (RMDs) from a traditional IRA and from a 401(k) when you reach age 73. For an IRA the first one is due by April 1 of the year after you turn 73, and every later one by December 31. A 401(k) plan may let you wait until you retire if you are still working there, but the plan does not have to offer that.

Roth money is treated differently. The original owner of a Roth IRA never has to take RMDs, and the IRS says the same now applies to designated Roth accounts in a 401(k) while the owner is alive. Beneficiaries who inherit a Roth account do face RMD rules. Missing an RMD is expensive: the IRS charges a 25% excise tax on the amount you should have taken, or 10% if you take it within two years.

Questions that decide which accounts you use

Does your employer match? A 50% match on contributions up to 6% of a $80,000 salary is $2,400 a year of extra money, and you only get it through the 401(k). The 401(k) calculator shows how much of the match you leave unclaimed at your current rate.
Is your income under the Roth IRA range? If yes, both IRAs are open to you. If no, a Roth 401(k) is your direct Roth option.
Are you covered by a plan at work? Then your income decides whether a traditional IRA contribution is deductible, using the ranges above.
Do you need access before 59½? Compare the exceptions above. They differ between a 401(k) and an IRA.
How much can you save in total? The retirement savings calculator works out what you need by retirement, and the compound interest calculator shows what regular deposits grow to at a rate you choose.

Frequently asked questions

Can I have a 401(k) and an IRA at the same time?

Yes. The two limits are separate. In 2026 you can put up to $24,500 of your pay into a 401(k) and up to $7,500 into IRAs. The catch is the tax deduction: if you are covered by a workplace plan and your income is in or above the IRS range, a traditional IRA contribution is only partly deductible or not deductible at all.

Is the IRA limit per account?

No. The IRS limit covers all your IRAs together. In 2026 the total you put into all your traditional and Roth IRAs combined cannot be more than $7,500, or $8,600 from age 50, and never more than your taxable compensation for the year.

Is there an income limit for a Roth 401(k)?

No. The IRS Roth comparison chart says there is no income limitation to participate in a designated Roth 401(k). The income limits apply to contributing to a Roth IRA, not to the Roth option in your workplace plan.

When is the deadline for an IRA contribution?

The tax return filing deadline for that year, not counting extensions. So you can still make a contribution for one tax year in the first months of the next. 401(k) money is different: it comes out of your paychecks during the year.

What happens if I take money out before 59½?

Besides any income tax due, you generally owe an additional 10% tax on early withdrawals from an IRA or a 401(k) unless an exception applies. Some exceptions only fit one type. Leaving your job in or after the year you turn 55 is an exception for a 401(k) but not for an IRA. A first-time home purchase, up to $10,000, and qualified higher education costs are exceptions for IRAs but not for a 401(k).

Sources

Written by Tobias Kurth, designer. Updated October 20, 2026.