401k vs IRA: Which Retirement Account Is Right for You?

Published August 2026 | 8 min read

The most common question in personal finance: Should I put money in my 401k or an IRA? The answer depends on your employer match, fees, and investment options. Use our free retirement calculator to see how much each choice grows over time.

Quick Comparison

Feature	401k	IRA
2026 Contribution Limit	$23,500	$7,000
Employer Match	✅ Yes	❌ No
Investment Choices	Limited (employer picks)	Unlimited
Fees	Often higher	Usually lower
Early Withdrawal	10% penalty + tax	10% penalty + tax

The Golden Rule: Employer Match First

Always contribute enough to get your full employer match before opening an IRA. It's free money with an instant 50-100% return.

Common match: 50% of contributions up to 6% of salary
Example: On a $60,000 salary, contribute $3,600 → employer adds $1,800
That's a 50% return before any market growth

When to Choose an IRA

After getting the full match, consider an IRA if:

Your 401k has high fees (over 1% expense ratio)
Your 401k investment options are terrible
You want more control over investments
You want access to low-cost index funds

IRA Types: Traditional vs Roth

Feature	Traditional IRA	Roth IRA
Tax Break	Now (deduction)	Later (tax-free growth)
Income Limit (2026)	None	$150k single / $236k married
Withdrawals in Retirement	Taxed as income	Completely tax-free

The Optimal Strategy

Contribute to 401k up to employer match
Max out Roth IRA ($7,000/year)
Go back to 401k and max it out ($23,500/year)
After that: taxable brokerage account

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The Bottom Line

Match first, then IRA, then max 401k. Use our retirement calculator to see the difference this strategy makes over 30 years.