401(k) vs Roth IRA: What's the Difference?
A 401(k) is an employer retirement plan, usually funded before tax, often with a company match and high limits. A Roth IRA is an account you open yourself, funded with after-tax money, that grows and comes out tax-free in retirement.
| 401(k) | Roth IRA | |
|---|---|---|
| Who opens it | Your employer | You, at any brokerage |
| Tax break | Usually now (pre-tax); Roth 401(k) option at some employers | Later — qualified withdrawals are tax-free |
| Employer match | Often yes | No |
| Contribution limit | Much higher | Lower |
| Income limits | None | Yes — high earners phase out |
| Investment choice | Limited to the plan's menu | Almost anything |
| Early access | Penalties on most early withdrawals | Contributions (not earnings) can be withdrawn anytime |
Bottom line
Common order: contribute to the 401(k) up to the full match, then fund a Roth IRA, then go back to the 401(k). Check current IRS limits each year.
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