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You can have both a Roth IRA and a 401(k) — or another type of employer-sponsored plan such as a Simplified Employee Pension (SEP) or Savings Incentive Match Plan for Employees (SIMPLE) IRA, depending on what your employer offers — but each account has its own annual contribution limit.
In 2023, you can contribute $6,500 total across all of your Roth IRA and traditional IRA accounts (yes, you can have more than one IRA), with an extra $1,000 if you’re 50 or older. In 2024, you can contribute a total of $7,000 across your IRAs, with that same $1,000 catch-up contribution for those 50-plus. However, there are income limits for the Roth IRA.
» Ready to get started? See our picks for the best Roth IRA accounts
When it comes to your 401(k) plan, you can contribute $22,500 in 2023 and $23,000 in 2024. If you’re 50 or older, the annual contribution maximum jumps to $30,000 in 2023 and $30,500 in 2024.
If you can max out both plans, congratulations: You’re well on your way to retirement success.
How to choose between a Roth IRA and a 401(k)
If you can’t contribute the maximum to both types of accounts, don’t worry. Most of us fall into that group. The ideal amount to save for retirement will vary by your financial situation and your overall goals. Check out our retirement calculator to measure your progress.
If you’re trying to figure out which type of account is the best place for your hard-earned dollars, start here:
If your employer offers a matching contribution in your 401(k) plan, consider contributing enough to get as much of that free money as you can.
Once you’re getting the full match, consider the pros and cons of a Roth IRA versus a 401(k). A lot will depend on the 401(k) you have. Some plans offer a good selection of low-cost investments; others, not so much. Some employers cover the plan’s administrative costs; others pass on those costs to employees. The beauty of an IRA (whether Roth or traditional) is that you can open one at just about any discount broker, with no account fees and access to a wide variety of low-cost investments.
Still not sure which account is best for you?
» Find out how to invest your IRA