Specific recommendations for five age brackets with salary, marginal bracket, projected outcome, and the right answer for each phase of a working career.
Capture the match. Then max the Roth IRA. The decades of tax free compounding ahead are the most valuable asset class in retirement planning.
$7,500 per year in a Roth IRA from 25 to 65 at 7 percent grows to roughly $1.6 million, tax free.
Match first, then Roth IRA. Add 401k contributions toward the employee cap if budget allows. Watch the Roth IRA phaseout if income is climbing fast.
Maxing both ($24,500 plus $7,500) over the decade adds roughly $480,000 by retirement at a 7 percent return.
Often above the Roth IRA phaseout. Use the backdoor Roth route. Pre tax 401k starts to shine because retirement bracket may be lower than peak career bracket.
Pre tax 401k contributions at the 32 percent bracket save roughly $7,840 per year in current taxes.
Catch ups unlock at 50: 401k cap rises to $32,500, Roth IRA cap rises to $8,600. Front load aggressively. Plan for the SECURE 2.0 mandatory Roth catch up if wages exceed $150,000.
Catch up dollars compounded for 15 years at 7 percent add roughly $221,000 of additional balance.
Ages 60 to 63 have a SECURE 2.0 super catch up that raises the 401k cap to $35,750. Take advantage. Begin Roth conversions in low income years before Social Security and RMDs.
Super catch up of $35,750 for four years plus a maxed Roth IRA totals roughly $174,400 of additional contributions.
| Age | Priority | 401k cap | Roth IRA cap | Watch out for |
|---|---|---|---|---|
| 22 to 30 | Match, then Roth IRA | $24,500 | $7,500 | Building emergency fund first |
| 30 to 40 | Match, Roth IRA, max 401k | $24,500 | $7,500 | Roth IRA phaseout if income climbs |
| 40 to 50 | Match, backdoor Roth, max 401k | $24,500 | $7,500 (backdoor) | Pro rata rule on conversions |
| 50 to 60 | All catch ups, balance pre tax and Roth | $32,500 | $8,600 | SECURE 2.0 mandatory Roth catch up at $150k+ |
| 60 to 63 | Super catch up, Roth conversions | $35,750 | $8,600 | Healthcare bridge to Medicare at 65 |
Almost always both. Capture the full employer match in the 401k, then fully fund a Roth IRA. At a 12 to 22 percent marginal bracket, post tax contributions cost very little. Decades of tax free compounding inside the Roth typically produce the largest after tax retirement balance.
Not at all. The catch up provisions (a $1,100 Roth IRA catch up and an $8,000 401k catch up at 50 plus) raise the contribution capacity. With 15 years to retirement and a 7 percent return, $8,600 per year in a Roth IRA grows to roughly $216,000 of tax free retirement income.
Three things. The SECURE 2.0 super catch up raises the 401k cap to $35,750 for ages 60 to 63 only. RMDs from the 401k still wait until 73. Healthcare planning becomes more involved if you retire before Medicare at 65.
There is no age cap on Roth IRA contributions, as long as you have earned income. Many people contribute through their working years and then continue smaller contributions during a part time retirement phase. Once earned income stops, contributions stop.