401(k) vs Roth IRA: Which Should You Fund First?
Updated 2026-06-03 · FinCalc Hub Editorial
Both a 401(k) and a Roth IRA are powerful retirement tools, but they work differently. Knowing which to fund first can add tens of thousands of dollars over a career.
The key difference: when you pay tax
A traditional 401(k) is funded with pre-tax dollars — you get a tax break now and pay tax on withdrawals in retirement. A Roth IRA is funded with after-tax dollars, but qualified withdrawals are completely tax-free.
If you expect to be in a higher tax bracket later, the Roth's tax-free growth is especially valuable.
A simple priority order
1) Contribute to your 401(k) up to the full employer match — that's an instant 100% return you should never leave on the table.
2) Then max out a Roth IRA ($7,000 in 2025, or $8,000 if 50+) for tax-free growth and flexibility.
3) Then return to the 401(k) and increase contributions toward the annual limit.
Run the numbers
Small differences in contribution rate compound dramatically over decades. Use the 401(k) calculator and Roth IRA calculator to compare scenarios side by side.
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FAQ
- Should I always get the full match first?
- Almost always yes. An employer match is free money and typically beats any other guaranteed return.
- Can I have both a 401(k) and a Roth IRA?
- Yes. Many savers contribute to both, subject to each account's annual limits and Roth income limits.