Roth 401(k) vs Roth IRA
Same tax break — after-tax money in, tax-free money out. What's different is everything around the tax break: contribution limits, the employer match, income caps, and fees. See which wrapper wins on your numbers.
Your numbers
The match only exists in the 401(k). The IRA is assumed to be in low-cost index funds with a 0.05% drag — many 401(k) plans charge more.
Roth 401(k)
Through your employer. Higher contribution limit, employer match, no income cap — but you're stuck with the plan's fund menu and fees.
Balance at retirement
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Total contributed
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2026 annual limit
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Roth IRA
You open it yourself. Lower limit and no match — but you pick the funds, so fees can be nearly zero.
Balance at retirement
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Total contributed
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2026 annual limit
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Balance over time
Same tax treatment, different wrapper
Both accounts take after-tax dollars in and hand you tax-free dollars out. From a pure tax perspective they're identical. The differences are everything else: the 401(k) lets you contribute a lot more per year and can come with an employer match, but there's a fund menu chosen by your employer and often a fee layer on top. The IRA caps you lower and has an income limit, but it's yours — any broker, any fund, fees as close to zero as you like.
The match changes everything
If your employer matches contributions, that's an instant 50–100% return on the matched dollars — free money that compounds for decades. No realistic fee difference comes close to offsetting it. In this comparison, the match alone usually decides the winner. If your plan has no match, the picture flips: the IRA's lower fees and better funds quietly compound in its favor.
Why do both
This isn't actually an either/or. The standard playbook:
- 401(k) up to the full match. Capture every matched dollar first — nothing else pays that well.
- Then fill the Roth IRA. Better fund choices, lower fees, more flexible withdrawal rules for contributions.
- Then back to the 401(k) until you hit its (much higher) limit, if you can swing it.
About these projections
Both accounts compound monthly at your expected return minus a fee drag: the 401(k) uses the plan expense you enter (default 0.4%), the IRA assumes a flat 0.05% index-fund-only drag. Contributions are capped at the 2026 IRS limits shown in the cards. The employer match is modeled as pre-tax (traditional) dollars — the usual default — which means it would be taxed at withdrawal. We display it gross, because the tax rate it'll face is decades away and unknowable; just remember the match line is worth somewhat less than its sticker value. A strictly fair comparison would haircut it by your retirement tax rate.
FAQ
Is the employer match Roth too?
Traditionally, no — matches go into a pre-tax (traditional) bucket even when your own contributions are Roth, and that money is taxed when withdrawn. SECURE 2.0 now lets plans offer a Roth match if they opt in (you'd pay tax on the match now instead), but many plans haven't. Ask your plan administrator.
Can I contribute to both?
Yes. The limits are completely separate — in 2026 you can put the full elective deferral into the 401(k) and the full contribution limit into the IRA, assuming your income allows the IRA. Maxing one doesn't reduce the other.
What if I earn too much for a Roth IRA?
The Roth 401(k) has no income limit at all — that's one of its quiet superpowers. And for the IRA, the "backdoor Roth" (contribute to a non-deductible traditional IRA, then convert) is a well-trodden workaround, though it gets messy if you already hold pre-tax traditional IRA money.