A 401(k) and a Roth IRA are both retirement accounts with tax advantages, but they work differently — and many people use both. This is educational information, not personalized tax or investment advice.
| Feature | 401(k) | Roth IRA |
|---|
| Where you get it | Through your employer | Open it yourself at a broker |
| Tax treatment | Usually pre-tax now, taxed in retirement | After-tax now, tax-free in retirement |
| Employer match | Often yes — free money | No |
| Contribution limits | Higher | Lower |
| Income limits to contribute | No | Yes, above certain incomes |
A common priority order
A widely used approach: first contribute to your 401(k) up to the full employer match (that match is an immediate return on your money), then fund a Roth IRA, then come back to the 401(k) for additional savings. Your own situation may call for a different order.
Roth vs traditional
Roth accounts are funded with after-tax money and grow tax-free; traditional accounts give you a tax break now but are taxed on withdrawal. Roth often suits people who expect to be in a similar or higher tax bracket later. Contribution and income limits change every year — check IRS.gov for the current figures.
Educational information only — not investment advice, and not a recommendation to buy any security. Expense ratios are approximate and can change; verify with the fund issuer. We are not a licensed financial advisor.