401(k) vs. Roth IRA: Where Should Your Retirement Dollars Go First?

How a Traditional 401(k) Works

A traditional 401(k) lets you contribute pretax dollars through payroll deductions, which lowers your taxable income for the year you contribute. The money grows tax deferred, and you pay ordinary income tax when you withdraw it in retirement.

• 2025 contribution limit: $23,500
• 2026 contribution limit: $24,500
• Catch-up (age 50+): $7,500 for 2025, $8,000 for 2026
• “Super” catch-up (ages 60–63): $11,250 in both 2025 and 2026, replacing the regular catch-up amount

How a Roth IRA Works

A Roth IRA works in reverse. You contribute after-tax dollars, meaning no upfront deduction, but qualified withdrawals in retirement come out completely tax free, including all the growth.

• 2025 contribution limit: $7,000
• 2026 contribution limit: $7,500
• Catch-up (age 50+): $1,000 for 2025, $1,100 for 2026

The Catch: Income Limits

Here’s the part that catches people off guard — Roth IRAs have income limits, and once you earn enough, you’re locked out of contributing directly.

• Single filers (2025): phase-out roughly $150,000–$165,000 of modified adjusted gross income
• Married filing jointly (2025): phase-out roughly $236,000–$246,000

Those ranges move up slightly for 2026. A traditional 401(k), by contrast, has no income limit at all — anyone with access to the plan can contribute regardless of how much they earn.

So How Do You Prioritize?

1. Capture the full employer match first. If your employer offers a 401(k) match, that’s the first stop. It’s free money, and there’s no equivalent anywhere else.
2. Max out a Roth IRA next, if you’re eligible. Tax-free growth over several decades is hard to beat, especially earlier in your career when your tax rate is likely lower than it will be later. Many advisors point people here right after capturing the match.
3. Go back and increase your 401(k) contributions if you still have room in your budget after maxing the Roth.

What If You Earn Too Much for a Roth?

If your income is too high to contribute to a Roth IRA directly, a “backdoor Roth” — contributing to a nondeductible traditional IRA, then converting it to a Roth — is a legitimate workaround many higher earners use. It does come with its own set of rules around existing IRA balances that are worth getting right before you try it.

Bottom Line

There’s no single “correct” account — the right mix depends on your income, your tax bracket now versus in retirement, and whether you have access to an employer match. Match first, then Roth if eligible, then back to the 401(k) is a solid default framework for most people, but it’s not one-size-fits-all.

Want a Retirement Strategy Built Around Your Numbers?

Contribution limits, income phase-outs, and backdoor Roth rules can get complicated fast, especially as your income changes over time. If you want a clear, personalized plan for where your retirement dollars should go, contact Sailesh Rapolu for a consultation and get guidance tailored to your situation.