401k vs Roth IRA: Full Comparison
Every important difference between these two retirement accounts.
| Feature | 401k | Roth IRA |
|---|---|---|
| Contribution limit (2025) | $23,500/yr ($31,000 if 50+) | $7,000/yr ($8,000 if 50+) |
| Who provides it | Employer | You open it personally |
| Employer match available | Yes - common perk | No |
| Tax treatment on contributions | Pre-tax (reduces income now) | After-tax (no deduction) |
| Tax treatment on growth | Tax-deferred | Tax-free |
| Tax on withdrawals | Taxed as ordinary income | Tax-free (qualified) |
| Investment options | Limited to plan menu | Any stock, ETF, fund |
| Fees | Often higher (plan admin fees) | You choose - can be very low |
| Income limits | None | Phases out $146k-$161k (single) |
| Required min distributions | Yes, starting at age 73 | No (Roth IRA only) |
| Early withdrawal penalty | 10% + taxes before 59.5 | Contributions any time penalty-free |
| Best for | Getting the match + tax deferral now | Tax-free growth, flexibility |
401k strengths
- + Employer match - free money
- + Higher contribution limit ($23,500)
- + Reduces taxable income today
- + Good for high earners who need deductions now
- + Automatic payroll deduction
Roth IRA strengths
- + Tax-free withdrawals in retirement
- + No required minimum distributions
- + Access contributions anytime (no penalty)
- + Unlimited investment options
- + No plan administrator fees