The retirement debate that's divided America — settled in 60 seconds.
It depends on your current vs. future tax rate. If you're in a high bracket now and expect lower income in retirement, 401(k) wins (tax deduction now, pay less tax later). If you're in a lower bracket now or expect higher rates in retirement, Roth wins (no deduction now, but completely tax-free withdrawals). Most people benefit from using both.
The 2025 401(k) employee contribution limit is $23,500 (up from $23,000 in 2024). If you're 50 or older, you can contribute an additional $7,500 catch-up, for a total of $31,000. The total limit including employer contributions is $70,000.
For 2025, single filers can contribute the full $7,000 with income under $150,000. Contributions phase out between $150,000 and $165,000. Above $165,000, you'd need a Backdoor Roth IRA strategy. Married filing jointly: $236,000 to $246,000 phase-out range.
Many employers match your 401(k) contributions up to a percentage of your salary. For example, a 4% match means if you contribute 4% of your salary, your employer adds another 4% — that's 100% free money. Not taking the full match is literally leaving money on the table.
Yes! You can contribute to both a 401(k) and a Roth IRA in the same year, subject to each account's separate limits. The optimal strategy for many people is: max employer match in 401(k) → max Roth IRA → return to 401(k) up to the limit.
If your income exceeds Roth IRA limits, you can contribute to a Traditional IRA (no income limit for non-deductible contributions) and then convert it to a Roth. This is legal and widely used by high earners. Be aware of the pro-rata rule if you have existing Traditional IRA balances.