If you've got extra money to save for retirement, you've probably run into this question: should it go into your 401(k) or your IRA? Both accounts offer real tax advantages, but most people don't have enough spare cash to max out both at once. So which one wins?
The short answer: contribute enough to your 401(k) to get your full employer match, then decide between an IRA and additional 401(k) contributions based on a few key factors. Here's how to think it through.
401(k) vs. IRA: What's Actually Different
A 401(k) is sponsored by your employer. You contribute through payroll, and your investment choices are limited to whatever menu your plan offers. An IRA is yours alone. You open it at any brokerage and can invest in almost anything — individual stocks, index funds, bonds, you name it.
2026 Contribution Limits
For 2026, the IRS raised the 401(k) employee deferral limit to $24,500. If you're 50 or older, you can add a catch-up contribution and put in up to $32,500. Workers aged 60 to 63 get an even bigger catch-up under SECURE 2.0, pushing their limit to $35,750.
IRAs work on a much smaller scale. The 2026 limit is $7,500 combined across traditional and Roth accounts, or $8,600 if you're 50 or older. That limit applies whether you split contributions between a traditional and Roth IRA or put everything in one.
!Side-by-side illustration comparing employer-sponsored 401(k) plans and individual IRA accounts
Here's the good part: these limits don't interact. Maxing out your 401(k) doesn't reduce how much you can put into an IRA, and vice versa.
Tax Treatment
Both accounts come in traditional and Roth flavors. Traditional contributions lower your taxable income now, and you pay tax when you withdraw in retirement. Roth contributions are taxed now, but withdrawals in retirement are tax-free. Your 401(k) plan may offer both options, or just one — check with your HR department if you're not sure.
Step 1: Never Leave Match Money on the Table
Before you think about IRAs at all, contribute enough to your 401(k) to capture your full employer match. If your company matches 50 cents per dollar up to 6% of your salary, and you're only contributing 3%, you're walking away from free money. No IRA or investment return can compete with an instant, guaranteed match. This step comes first, no exceptions.
!Illustration symbolizing an employer 401(k) matching contribution
Step 2: IRA or More 401(k)?
Once you've got the match locked in, the next dollar you save has options.
The case for the IRA: You'll have far more investment choices than your 401(k) offers, and often lower fees. A Roth IRA also gives you tax-free growth, though it's only available if your income falls below the 2026 phase-out range — $153,000 to $168,000 for single filers, or $242,000 to $252,000 for married couples filing jointly. The case for more 401(k): There's no income limit on traditional 401(k) deferrals, and the contribution ceiling is much higher once your IRA is maxed. It's also simpler, since there's no new account to open or manage. When income makes the call for you: If you're covered by a workplace plan, your ability to deduct traditional IRA contributions phases out between $81,000 and $91,000 for single filers, or $129,000 and $149,000 for married couples filing jointly. Above those thresholds, you lose both the deduction and, at higher income, the Roth option — which usually tips the scale back toward your 401(k).Step 3: Max It Out, Then Circle Back
Once you've maxed the account you prioritized, redirect any leftover savings to the other one. For many savers, that means: match first, IRA next, then back to the 401(k) if there's still room. If income limits ruled out the Roth IRA or the deduction, that order often flips.
Quick Recap
- Contribute enough to get your full 401(k) match.
- Choose IRA or additional 401(k) contributions based on investment options, fees, and your income.
- Check IRA income limits before assuming you're eligible.
- Max your priority account, then fund the other.
