RI
RetailInvestor

401(k) vs IRA: Which Should You Choose?

Compare 401(k) and IRA retirement accounts.

Feature
401(k)
IRA
Contribution Limit (2026)
$23,500 ($31,000 if 50+)
$7,000 ($8,000 if 50+)
Employer Match
Yes (if offered)
No
Investment Options
Limited (plan-dependent)
Unlimited
Tax Options
Traditional + Roth 401k
Traditional + Roth IRA
Who Controls It
Employer
You

401(k)

Advantages

  • +Higher contribution limit ($23,500)
  • +Employer match (free money)
  • +Payroll deduction (automatic)
  • +Loan option available
  • +Mega backdoor Roth option

Disadvantages

  • -Limited investment choices
  • -Higher fund fees common
  • -Employer controls the plan
  • -Must leave job to rollover

Best For:

Employer match, high earners, automatic saving

IRA

Advantages

  • +Full investment flexibility
  • +Lower cost funds available
  • +You control the account
  • +Roth IRA option (tax-free)
  • +Choose any brokerage

Disadvantages

  • -Lower limit ($7,000)
  • -No employer match
  • -Must set up yourself
  • -Income limits (Roth)
  • -No payroll deduction

Best For:

Investment flexibility, Roth strategy, supplementing 401k

The Bottom Line

The recommended order: 1) Contribute to 401k up to employer match, 2) Max out Roth IRA ($7,000), 3) Go back and max out 401k ($23,500), 4) Taxable brokerage account. Always get the full employer match first — it is an instant 50-100% return on your money.

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