Roth IRA vs. 401(k): Which Should You Max Out First?

The Smart Order of Operations for Retirement Dollars

Navigating multiple tax-advantaged accounts can be confusing. To optimize every dollar for tax freedom and growth, follow this proven priority order.

Step 1: 401(k) Up to the Employer Match

If your employer matches your contributions (e.g. 50% match up to 6% of salary), always contribute enough to get the full match first. This is an immediate 50% to 100% risk-free return on your investment.

Step 2: Max Out Your Roth IRA

In 2025/2026, you can contribute up to **$7,000 to a Roth IRA** ($8,000 if 50+). Roth IRAs offer superior investment choices, zero administrative fees, and 100% tax-free growth and withdrawals in retirement.

Step 3: Max Out the Rest of Your 401(k)

If you still have funds to invest after maxing your Roth IRA, return to your 401(k) up to the annual elective deferral limit ($23,500 for 2025/2026).