Roth IRA vs 401(k): Which One Should You Max Out in 2026?
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The average American will need $1.8 million to retire comfortably in 2026 (Fidelity). Yet 62% of workers underfund their retirement accounts. The Roth IRA and 401(k) are the two most powerful tools to close that gap — but which one deserves your dollars first?
2026 Contribution Limits (IRS Confirmed)
- 401(k): $23,500 (under 50) | $31,000 (50+)
- Roth IRA: $7,000 (under 50) | $8,000 (50+)
Pro tip: You can contribute to both if income-eligible.
Tax Treatment: The Core Difference
| 401(k) Traditional | Roth IRA | |
|---|---|---|
| Contributions | Pre-tax (lowers 2026 taxes) | After-tax (no deduction) |
| Withdrawals | Taxed as income | Tax-free after 59½ |
| RMDs | Required at 73 | None (pass tax-free to heirs) |
Who Wins in 2026?
- High earners ($100K+): Max 401(k) first for the tax deduction. Backdoor Roth if phased out.
- Middle class ($50K–$90K): Split 50/50. Get employer match + tax-free growth.
- Side hustlers: Roth IRA wins — no RMDs, flexible withdrawals.
Real Example: Sarah, 32, $65K Salary
- 401(k): $12,000 → saves $2,640 in 2026 taxes (22% bracket)
- Roth IRA: $7,000 → grows to $56,000 tax-free by 59½
Action step: Automate $583/month to 401(k) + $583/month to Roth IRA.
Related: Emergency Fund 101 — protect your retirement contributions.