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Roth 401(k) vs Roth IRA
Your salary, your savings, your match — the optimal dollar-by-dollar order.
X VS Y COMPARISON · MONEY · RETIREMENT
Roth 401(k) vs Roth IRA: Where Should Your Next Dollar Go?
Two Roth accounts, one tax treatment — but wildly different rules. The Roth 401(k) holds $24,500 a year, takes your employer match, and has no income limits. The Roth IRA holds $7,500, phases out above $153,000 of income, and lets you buy anything. At the defaults — $90,000 salary, $15,000 a year to save, a 50%-to-6% match, 7% returns, 30 years, 22% tax — the optimal split is $5,400 → Roth 401(k) (captures the full match), $7,500 → Roth IRA, then $2,100 → back to the Roth 401(k): $114,184 of tax-free Roth growth, and the match alone is worth $16,031 after-tax at retirement. Enter your numbers — the order is the strategy.
The 2026 limits, side by side
Both are Roth — pay tax now, never again on qualified withdrawals — but the rulebooks diverge immediately (IRS Notice 2025-67):
| Roth 401(k) | Roth IRA | |
|---|---|---|
| 2026 contribution limit (under 50) | $24,500 | $7,500 |
| At 50+ (catch-up) | $32,500 | $8,600 |
| Income limits | None | Phases out $153k–$168k single / $242k–$252k joint |
| Employer match | Yes — the whole point of step one | No |
| Investment choice | Your plan’s menu | Anything — every fund, every stock |
| Withdraw contributions early | Plan rules apply | Anytime, tax- and penalty-free |
| RMDs | None on either — SECURE 2.0 ended Roth 401(k) RMDs in 2024 | |
| Loans | Often allowed | Never — IRAs can’t be borrowed against |
Why the order is the strategy
A Roth dollar is a Roth dollar — $1,000 in a Roth 401(k) and $1,000 in a Roth IRA grow identically. So the comparison isn’t really “which account is better”; it’s “which dollar goes where first.” The textbook order, and what the calculator implements:
Step 1: Roth 401(k) up to the full match. A 50%-to-6% match on $90,000 is $2,700 a year of free money — an instant 50% return no fund choice can beat. The match lands pre-tax even when your contributions are 100% Roth (a Roth match is legal under SECURE 2.0 but still rare), so you end up holding both tax buckets automatically.
Step 2: Roth IRA to the limit. With the match captured, the IRA’s unlimited fund choice and withdraw-your-contributions-anytime flexibility beat most 401(k) menus. At the defaults that’s the full $7,500.
Step 3: back to the Roth 401(k). The IRA’s ceiling is low; the 401(k)’s $24,500 ceiling absorbs everything else. No income limits, no phase-outs — the 401(k) is the back door that never closes.
The worked example: $5,400 / $7,500 / $2,100
$90,000 salary, $15,000 a year to save, 50%-to-6% match, 7% returns, 30 years, 22% tax. Watch where each dollar lands:
Step 1: 6% of $90,000 = $5,400 into the Roth 401(k) → captures the full $2,700 match. Step 2: $15,000 − $5,400 = $9,600 remains; the Roth IRA takes $7,500 (the full 2026 limit; $90,000 is under the $153,000 phase-out). Step 3: $2,100 remains, and the 401(k) has $19,100 of ceiling left → $2,100 back to the Roth 401(k). Nothing overflows.
The payoff: $15,000 of Roth contributions × 1.0730 (7.6123) = $114,184 tax-free. The $2,700-a-year match × 7.6123 × (1 − 22%) = $16,031 after-tax. The match is worth more than the entire IRA step — which is exactly why it goes first.
Output · formula · meaning
| Output | Formula | What it means |
|---|---|---|
| 401(k) for the match | min(savings, salary × match%) | $5,400 at the defaults — captures the full $2,700 match. |
| Roth IRA step | min(savings − step 1, $7,500, eligible amount) | $7,500 at the defaults — the full 2026 limit. |
| Back to the 401(k) | min(remainder, $24,500 − step 1) | $2,100 at the defaults — the 401(k)’s big ceiling. |
| Match, after-tax at retirement | match × 1.0730 × (1 − tax) | $16,031 at the defaults — free money, compounded. |
| Roth dollars at retirement | (steps 1–2–3) × 1.0730 | $114,184 tax-free at the defaults. |
Who uses this
- New hires setting contributions: translating “50% to 6%” into the exact dollar amount that captures the full match.
- High earners near $153,000: seeing the Roth IRA phase-out shrink their step two — and the backdoor Roth workaround.
- Super-savers past $32,000/yr: watching the overflow land in a taxable brokerage once both ceilings fill.
- Anyone with a bad 401(k) menu: weighing high-fee plan funds against the IRA’s unlimited choice after the match.
Accuracy & limitations
Models Roth contributions only — the traditional-vs-Roth choice is a separate comparison (see the guide). The match is valued as pre-tax dollars taxed at your marginal rate at withdrawal; real withdrawals face your future rate, not today’s. The overflow is shown pre-tax; a taxable brokerage owes tax on gains along the way. IRA eligibility uses 2026 MAGI phase-outs ($153k–$168k single, $242k–$252k joint); the backdoor Roth is noted but not modeled. 401(k) loan provisions, vesting schedules, and state taxes are not modeled. 2026 limits per IRS Notice 2025-67. Not tax or financial advice.
Cite this calculatorBright Side Kit. “Roth 401(k) vs Roth IRA: Where to Save 2026.” brightoolbox.com, 2026.
Bright Side Kit. "Roth 401(k) vs Roth IRA: Where to Save 2026." https://brightoolbox.com/roth-401k-vs-roth-ira/ Accessed October 23, 2026.Frequently asked questions
Isn’t a Roth dollar a Roth dollar? Why does the account matter?
Tax-wise, yes — $1,000 of Roth 401(k) and $1,000 of Roth IRA grow identically and withdraw identically. The account matters because of the rules around the dollar: only the 401(k) gets the match (free money), only the 401(k) holds $24,500, only the IRA lets you buy anything, and only the IRA phases out by income. That’s why the answer is an order — match, IRA, back — not a winner.
I earn too much for a Roth IRA. Now what?
Above $168,000 single / $252,000 joint (2026), direct Roth IRA contributions are off the table — but the backdoor Roth isn’t: contribute $7,500 to a traditional IRA (nondeductible at that income) and convert it to Roth. No income limit on conversions. The calculator zeroes out step two at these incomes and routes everything through the 401(k); treat the backdoor as your manual step two.
Should I do Roth or traditional 401(k) contributions?
Different question from this comparison — and it hinges on today’s marginal rate vs your expected rate in retirement. The short version: Roth wins if you’ll be in a higher bracket later (young, early career, expecting big raises); traditional wins if you’re at peak earnings now. Our Roth vs Traditional 401(k) guide models that head to head.
Is the employer match really pre-tax if I contribute Roth?
Yes. Matching dollars land in the pre-tax bucket even when your contributions are 100% Roth — the match can’t go Roth-side under most plans (SECURE 2.0 permits Roth matching, but few plans offer it yet). You’ll owe ordinary income tax when you withdraw the match dollars. That’s why the calculator values the match after-tax.
My 401(k) fund menu is terrible. Should I skip it after the match?
That’s exactly what step two is for. Capture the match (an instant 50–100% return beats any fee), then route the next $7,500 to the IRA’s unlimited menu. A 1%-a-year fee drag on $100,000 is $1,000 a year forever — fund choice is a real, compounding cost. Only come back to the 401(k) in step three if the IRA ceiling fills first.
Can I max out both accounts in the same year?
Yes — the limits are independent. Under 50 in 2026: $24,500 + $7,500 = $32,000 of Roth contributions, plus the employer match on top (total additions cap: $72,000). If your savings exceed $32,000, the calculator shows the overflow landing in a taxable brokerage.