Roth IRA vs 401(k): Where Should Your Next Dollar Go?

Most Americans save haphazardly. The "right" order of accounts isn't complicated — it just isn't obvious.

The priority ladder

1. 401(k) up to employer match. Free money. 100% instant return. Skipping this is financial malpractice. 2. Max HSA (if eligible). Triple tax-advantaged: deductible in, tax-free growth, tax-free out for medical. 3. Max Roth IRA ($7,000 in 2026, $8,000 if 50+). Tax-free growth for decades. 4. Continue 401(k) up to $23,000 limit ($30,500 if 50+). 5. Taxable brokerage for anything beyond.

Why Roth before 401(k) beyond the match

Young earners in the 22-24% bracket are unlikely to be in a lower bracket at retirement. Paying taxes now at 22% and growing tax-free for 40 years typically beats deferring taxes and paying 22-30% later on a much bigger corpus. Rules of thumb:

• Under 25% bracket today, expect higher later? → Roth wins
• 32%+ bracket today, plan to retire in a low-tax state? → Traditional wins
• Unsure? → Split 50/50

The Backdoor Roth

Above the Roth income phase-out ($165k single, $246k MFJ)? Contribute to a Traditional IRA (non-deductible) then convert to Roth. Legal, IRS-sanctioned, done every year by millions.

Use our 401(k) Calculator and Roth IRA Calculator to see your own numbers.