401(k) vs Roth IRA: Which Should You Use First?
How employer match, tax treatment and flexibility compare, and a simple order for filling retirement accounts.
You do not have to choose one forever. The question is which to fill first.
A simple order many people follow
- 401(k) up to the employer match. A 50% match on 6% of a $60,000 salary is $1,800 of free money a year.
- Roth IRA next, for tax-free growth and more investment choices.
- Back to the 401(k) for any more you want to save, up to the limit.
Traditional vs Roth
Traditional contributions cut tax now and are taxed when you withdraw. Roth contributions are taxed now and grow tax free. A Roth tends to win if your tax rate will be higher later; a traditional account wins if it will be lower.
Limits and income rules change
Contribution limits and Roth income limits are reset by the IRS regularly, so check the current figures before you decide.
Compare with your numbers
Try the Roth vs traditional calculator, project your plan in the 401(k) calculator and see your total in the retirement savings calculator.
This article is general education, not financial advice.