401(k) vs. Roth IRA vs. Traditional IRA: Charts, Tax Rules, and Clear Examples
A 401(k), Roth IRA, and traditional IRA are all retirement accounts, but they answer different questions. A 401(k) is usually tied to work and may include an employer match. A Roth IRA uses after-tax contributions and can provide qualified tax-free withdrawals later. A traditional IRA may offer an upfront deduction, then withdrawals are generally taxed in retirement.
The clearest way to compare them is to separate four choices: where the account comes from, when taxes are paid, how much can go in, and what happens when money comes out. The charts below use 2026 IRS limits and rules as a starting point, but your plan document, income, filing status, and tax situation can change the answer.
Quick comparison chart
| Account | Where it comes from | Tax treatment | 2026 contribution limit | Best first question |
|---|---|---|---|---|
| 401(k) | Employer plan | Traditional pre-tax or Roth if the plan offers it | $24,500 employee deferral, plus catch-up rules if eligible | Does my employer match contributions? |
| Roth IRA | Individual account | After-tax contribution, qualified withdrawals can be tax-free | $7,500 across Roth and traditional IRAs combined, plus $1,100 catch-up if age 50 or older | Am I eligible under the income limits? |
| Traditional IRA | Individual account | May be deductible now, withdrawals generally taxed later | $7,500 across Roth and traditional IRAs combined, plus $1,100 catch-up if age 50 or older | Can I deduct the contribution? |
Tax timing graph
| Timeline | Traditional 401(k) or deductible traditional IRA | Roth 401(k) or Roth IRA |
|---|---|---|
| Contribution year | Potential tax break now | No upfront tax deduction |
| While invested | Tax-deferred growth inside the account | Tax-free growth inside the account if rules are met |
| Qualified retirement withdrawal | Generally taxable as ordinary income | Generally tax-free |
| Main tradeoff | Helps if your tax rate is higher now than later | Helps if your tax rate is lower now than later |
2026 limits to know
For 2026, the IRS says the basic elective deferral limit for many 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan is $24,500. The general age-50 catch-up contribution limit for many of those plans is $8,000, and a higher catch-up limit applies for certain workers ages 60 through 63.
For IRAs, the 2026 annual contribution limit is $7,500 across all traditional and Roth IRAs combined. The IRA catch-up contribution limit for people age 50 or older is $1,100 for 2026. That means a person cannot put $7,500 into a Roth IRA and another $7,500 into a traditional IRA for the same year unless the IRS limit changes or special rollover rules apply.
Employer match chart
| Situation | Why it matters | Plain-English takeaway |
|---|---|---|
| 401(k) has a match | The employer may add money when you contribute | Consider the match before comparing IRA options |
| 401(k) has no match | The account may still have high limits and payroll convenience | Compare investment menu, fees, Roth option, and IRA eligibility |
| IRA has no employer match | IRAs are individual accounts | The advantage is usually flexibility, not employer money |
An employer match is often the first practical difference because it can change the order of operations. If a plan matches part of your contribution, skipping the match may mean giving up compensation. The right contribution level still depends on cash needs, debt, emergency savings, and plan rules.
Income-limit explainer
| Rule area | Roth IRA | Traditional IRA |
|---|---|---|
| Can income limit contributions? | Yes, Roth IRA contribution eligibility phases out at higher income levels | No income limit to contribute if you have eligible compensation, but deductibility can phase out |
| Does workplace-plan coverage matter? | It does not create the Roth IRA income limit by itself | It can affect whether a traditional IRA contribution is deductible |
| 2026 single filer range highlighted by IRS | Roth IRA contribution phase-out is $153,000 to $168,000 | Traditional IRA deduction phase-out is $81,000 to $91,000 if covered by a workplace plan |
| 2026 married filing jointly range highlighted by IRS | Roth IRA contribution phase-out is $242,000 to $252,000 | Traditional IRA deduction phase-out is $129,000 to $149,000 if the contributing spouse is covered by a workplace plan |
This is where many comparisons become confusing. A high-income saver may be allowed to use a 401(k), may be limited or blocked from making a direct Roth IRA contribution, and may be able to contribute to a traditional IRA without receiving a deduction. Those are three different tests.
Withdrawal-rule chart
| Account | Early withdrawal caution | Required minimum distribution note |
|---|---|---|
| Traditional 401(k) | Taxes and penalties can apply before exceptions | RMD rules generally apply |
| Roth 401(k) | Qualified Roth rules and plan rules matter | Roth 401(k) RMD treatment has changed under recent law, so verify current plan handling |
| Roth IRA | Contributions can be more flexible than earnings, but ordering and five-year rules matter | Original owner generally does not have lifetime RMDs under current rules |
| Traditional IRA | Taxes and penalties can apply before exceptions | RMD rules generally apply |
Withdrawal rules are more detailed than a single chart can show. Early distributions, rollovers, hardship rules, loans, inherited accounts, required minimum distributions, and five-year Roth rules can all change the tax result. Use the chart as a map, then verify the exact IRS and plan rule before taking money out.
Simple decision flow
- If your employer offers a 401(k) match, review that match first.
- If you want the highest workplace contribution limit, compare traditional and Roth 401(k) options if both are available.
- If you want more investment-menu flexibility, compare Roth IRA and traditional IRA eligibility.
- If your tax rate may be higher later, Roth treatment may be worth evaluating.
- If your tax rate may be lower later, traditional pre-tax treatment may be worth evaluating.
- If you are near an income phase-out, verify the current IRS ranges before contributing.
Example: same saver, three different tax stories
Imagine a worker who can save $6,000 this year. A traditional 401(k) contribution may reduce taxable income now if made pre-tax. A Roth 401(k) contribution would not reduce taxable income now, but qualified withdrawals may be tax-free later. A Roth IRA could offer similar Roth tax treatment, but only if the saver is eligible and stays within the IRA contribution limit.
The best choice is not always one account. Many savers use more than one: enough 401(k) contributions to capture a match, then an IRA for flexibility, then additional 401(k) savings if cash flow allows. The priority order depends on fees, investment choices, income limits, tax bracket, and employer plan quality.
The takeaway
A 401(k), Roth IRA, and traditional IRA are not interchangeable. Start with the employer match, then compare tax timing, contribution limits, income limits, investment choices, fees, and withdrawal rules. For 2026, the headline numbers are $24,500 for many workplace-plan employee deferrals and $7,500 across traditional and Roth IRAs combined, but the best account mix depends on your tax situation and plan details.