Retirement Planning Series
Retirement · Accounts
401(k) vs IRA —
The Real Differences
The honest answer: most people should max both. They're different tools that work together. But if you can only do one — or you're deciding where the next dollar goes — the comparison matters.
Combined max contribution for someone over 50
$23K to a 401(k) + $7K to an IRA + $7.5K 401(k) catch-up + $1K IRA catch-up. Most people don't realize they can do both.
401(k) / 403(b)
Employer-sponsored, automatic payroll deduction
Sponsored by your employer. Contribute via payroll deduction. Often includes an employer match (free money). Higher contribution limits than IRAs ($23K + $7.5K catch-up at 50+ in 2025). Limited investment menu set by the plan administrator.
Pros
Cons
Best for
Anyone whose employer offers one — especially if there's a match. The match alone is typically 50-100% return on the first 3-6% of salary.
IRA (Traditional or Roth)
Individual, you choose everything
You open it with any brokerage. Pick any investments you want. Lower contribution limits ($7K + $1K catch-up at 50+ in 2025). Roth IRAs have income limits — high earners can't contribute directly (but can backdoor).
Pros
Cons
Best for
Self-employed, gig workers, or anyone wanting investment freedom. Pair with a 401(k) — most workers should max BOTH.
The right order of operations
- 401(k) up to the match. Free money. Always first.
- Max the Roth IRA. Better investment menu, lower fees, no RMDs.
- Back to 401(k) up to the limit. Pre-tax savings + automatic discipline.
- Then HSA, taxable brokerage, IBC, or other vehicles. Depending on goals.
Optimize your contribution order
We'll review your current contributions, match, income, and goals — and show you the order that maximizes returns over your time horizon.
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