401(k) vs. IRA: Where Should You Put Your Retirement Money First?

The Optimal Contribution Order

1. Contribute to your 401(k) up to the employer match — this is an instant 50–100% return, nothing beats it. 2. Max out a Roth IRA ($7,000/year in 2026 if under 50). 3. Go back and max out your 401(k) ($23,000/year in 2026). 4. Invest in taxable brokerage accounts if you still have capacity.

Traditional vs. Roth: Which to Choose?

Traditional 401(k)/IRA: tax deduction now, pay taxes in retirement. Roth 401(k)/IRA: no deduction now, tax-free in retirement. General rule: choose Roth if you expect to be in a higher tax bracket in retirement. Most people under 40 are usually better served by Roth accounts.

The Roth IRA Advantage

Roth IRA contributions (not earnings) can be withdrawn tax- and penalty-free at any time. This makes it a flexible emergency fund backup in addition to a retirement account. No required minimum distributions (RMDs) in retirement is another major advantage.

2026 Contribution Limits

401(k): $23,000 ($30,500 if 50+). IRA: $7,000 ($8,000 if 50+). HSA: $4,150 individual, $8,300 family. Health Savings Accounts, when used as investment accounts, are triple tax-advantaged and worth considering before taxable investing.