The question comes with a form: “401(k) or Roth IRA?” It is the most-asked version of the vehicle choice, and the most-answered one. Almost every answer is a listicle that ends with “it depends,” and it depends on one number. You have been handed a vehicle and a form. Here is what the vehicle actually does.
The 401(k)
The vehicle is the employer’s plan. It does one of two things to your money, and you choose which when you make the deferral election. A traditional deferral is tax-deferred: the amount leaves your pay before the tax is computed, grows in the plan, and is taxed at the rate in effect when you take it out. A designated Roth deferral is the mirror image: the tax is paid on it now, and the account — contribution and growth — is tax-free when you take it out. The vehicle’s cost is the plan’s cost: recordkeeping and administration fees charged to the account. Not the market’s cost. The market is inside the vehicle; the fee is on the vehicle. The limit is dated. For 2026, IRS Notice 2025-67 sets the employee deferral limit at $24,500, up from $23,500 in 2025. And the 401(k) is the only vehicle in this article with an employer inside it, which is the whole of the next-but-one section.
The Roth IRA
The vehicle is your own account, and there is no employer in it. What it does is the mirror of the traditional 401(k) deferral: the contribution is made with after-tax money, and everything after that — contribution and growth — is tax-free at distribution. The limit is dated and smaller: $7,500 for 2026, up from $7,000, per the IRS’s 2026 cost-of-living table. The cost of this vehicle is an income test, not a fee: for 2026 the contribution phases out between $153,000 and $168,000 of modified AGI for a single filer, and between $242,000 and $252,000 for a married couple filing jointly, per Notice 2025-67. Above the top of the range the vehicle closes; below it, it is open. That is the whole of the IRA’s cost, and it is the reason the comparison in the last section has a floor.
The 2026 Limits, Side by Side
The dated table. Every figure is the 2026 number from Notice 2025-67 unless the row says otherwise.
| 2026 limit | 401(k) plan | 403(b) plan (for the record) | IRA, traditional or Roth |
|---|---|---|---|
| Base contribution | $24,500 | $24,500 | $7,500 |
| Catch-up, age 50 or older | $4,000 | $8,000 | $1,100 |
| Additional, ages 60 to 63 | $5,250 | $11,250 | $1,000 |
| Maximum contribution | $33,750 | $43,750 | $9,600 |
| Combined limit including employer money | $72,000 (IRC 415(c)) | $72,000 | — (a rollover is not a contribution) |
2025, for the record of what changed: $23,500 and $3,500 in the 401(k) column; $7,000 and $1,000 in the IRA column. The notice is the dated document — Notice 2025-67, published with the 2026 cost-of-living adjustments — and where a secondary source shows a different figure, the notice is the one and the difference is noted. There is one here. The IRS’s own summary page lists the 50-or-older catch-up as $8,000 and the 60-to-63 addition as $11,250 in a combined row titled “401(k), 403(b), profit-sharing plans, etc.” Notice 2025-67 splits that row: $4,000 and $5,250 go to 401(k) plans (IRC 414(v)(2)(B)(ii) and (E)(ii)); $8,000 and $11,250 go to the 403(b) and 457(b) row (IRC 414(v)(2)(B)(i) and (E)(i)). The higher catch-ups are the 403(b)’s, and the notice is the document. The IRA’s $1,000 for ages 60 to 63 is the flat additional amount the SECURE 2.0 Act added in 2022 — not indexed, so it does not move with the table around it; the $9,600 maximum for that age group is the dated arithmetic of the three rows above it. The retirement calculator article on this site used the combined $8,000/$11,250 figures for its 401(k)/403(b) contribution line; the base $24,500 is the same either way, and the notice’s split is the one this table carries.
One more dated item on this page, because it changes who gets to make a pre-tax catch-up in 2026: if your 2025 wages from an employer exceeded $150,000 — the threshold the same notice raised from $145,000 — your 2026 catch-up contributions to that plan must be designated Roth. Above that wage line the pre-tax catch-up is gone from the plan. The vehicle is the same; the designation is not.
The Match, Counted as a Return
There is one return in this table that is dated before the market gets involved. It is the employer match. It is not a market return. It is a fixed number set by the plan’s formula, paid the year it is earned, and it is the only number in this article that the next quarter’s index level cannot change.
The worked example, with dated inputs. Pay of $60,000. The plan matches 50 cents on the first 6% of pay.
- Defer 6% of pay: $3,600. The match is 3% of pay: $1,800. The return on the amount you contributed is 50%, in that year, before the market moves at all.
- Defer $24,500 — the 2026 401(k) limit, 40.8% of that pay — under the same formula: the match is still $1,800, because the formula is written against 6% of pay, not against your deferral. The return on your contribution is 7.3%.
The match is a number, not a percentage of your deferral. Deferring more than the matched band does not earn more match; it earns the same match on a larger base, so the return falls while the dollars are unchanged. Deferring at least the matched band — 6% of pay in this plan — takes the whole number. Deferring less leaves a fixed amount of dollars on the table, and that amount does not depend on the market. The cost of the vehicle, not the cost of the market, is what this line is about.
The match also answers which deferral to make, because in a 401(k) the employer match is not a Roth contribution: under the Internal Revenue Code it is treated as a pre-tax amount in the account even when your own deferral is designated Roth (IRC 402A(f)). The match is a pre-tax return either way. The Roth designation is a decision about your own money only. The Roth IRA has no employer and therefore no match at all; that absence is the arithmetic the next section turns on.
The Bracket Where the Answer Flips
The comparison is two after-tax values at the same retirement age, on the same contribution, at the same growth rate.
- The pre-tax deferral: the contribution enters before the tax is computed, grows at rate g, and the account is taxed at the marginal rate in effect at distribution, t_ret. What you keep is C(1+g)(1−t_ret).
- The Roth deferral: the contribution enters after tax — you keep C(1−t_now) of it at the marginal rate t_now in effect now — and grows at the same g, with nothing taxed at distribution. What you keep is C(1−t_now)(1+g).
The growth cancels. (1+g) is on both sides of the comparison, dated or not, and it drops out. What is left is t_now against t_ret: the bracket you are in now, and the bracket you expect to be in at retirement. The pre-tax deferral wins when the retirement bracket is lower. The Roth deferral wins when it is higher. The flip is at equality, which means the bracket where the answer flips from pre-tax to Roth is your current marginal bracket itself. That is the number the listicles skip, because it is a number you have to look up for yourself, not a slogan you can borrow.
Shown at three income levels, 2026, single filer, after the $16,100 standard deduction (IRS news release IR-2025-103, October 2025; 2026 rate schedule in the same release):
| 2026 income | Taxable income | Current marginal bracket | The flip |
|---|---|---|---|
| $50,000 | $33,900 | 12% | Roth wins if the expected retirement bracket is above 12% (22% or higher); pre-tax wins at 10% |
| $120,000 | $103,900 | 22% | Roth wins above 22% (24% or higher); pre-tax wins at 22% or below |
| $250,000 | $233,900 | 32% | Roth wins above 32% (35% or higher); pre-tax wins at 32% or below |
In dollars, at the middle level. The $120,000 earner, 22% marginal. A $24,500 deferral saves $5,390 of 2026 tax if it is pre-tax, and $0 if it is Roth. At retirement the same account is taxed at the retirement rate if pre-tax and not at all if Roth. A retirement rate of 24% or more and the Roth deferral leaves more in the pocket; 22% or less and the pre-tax deferral does. The growth assumption did not enter the comparison, because it cancels, and the contribution limit did not enter either, because both vehicles carry it up to the lower of the two. What entered is the bracket, and the bracket is dated to 2026.
The one question that decides it, then, is the bracket question: is your expected marginal rate at retirement higher or lower than the one you are in now? Answer that and the deferral chooses itself.
Two dated corollaries, because the bracket question has a floor and a ceiling in 2026. The floor: the Roth IRA’s income limit does not gate the 401(k). A single filer at $250,000 cannot make a 2026 Roth IRA contribution — the $168,000 phase-out cap is below that income — but the same person can make a full $24,500 Roth 401(k) deferral, because the plan has no income test. The income test is on the IRA, not on the plan, and the dated mechanism for a high-earner IRA is the backdoor Roth IRA: a traditional IRA contribution converted to a Roth in the same year. A mechanism with a function, named here without a recommendation — the bracket question is the same question either way. The ceiling: the $150,000 2026 wage threshold noted in the limits section forces the catch-up into Roth above that wage, so for that earner the bracket decision about the catch-up is made by the wages, not by the bracket.
The Rollover: Can You Roll a 401(k) Into a Roth IRA?
The second most-asked version of this question is the rollover, and the 2026 answer, per IRS Publication 590-A (2026 edition), is yes — with one dated catch and one that is not.
What the rule does. An eligible rollover distribution from a 401(k) can be rolled into a Roth IRA. Pre-tax money is included in income in the year of the rollover — a conversion, with the tax due that year — and the rollover is not a contribution: the $7,500 2026 IRA limit does not apply to it. What does apply is the IRA’s annual addition limit, tied to the IRC 415(c) figure: $72,000 for 2026. Done directly, trustee to trustee, nothing is withheld. Done by check, you hold a 60-day window with 20% withheld, and that withholding is money you have to chase to finish the rollover.
The dated catch. A Roth 401(k) to Roth IRA rollover is tax-free — the money already paid its tax — but the five-year period that governs qualified distributions in the receiving Roth IRA runs from the first tax year for which a contribution was made to the initial Roth IRA. Roll a twenty-year-old plan account into a newly opened Roth IRA and the clock on the earnings starts in the rollover year, not in the plan’s first year. The rollover is a decision, not a form: the form does not choose the clock.
The one that is not. If the IRA already holds pre-tax amounts, the conversion is taxed pro-rata: the pre-tax share of the total traditional IRA balance is taxed with the conversion, not only the amount that moved. That is why the IRA is checked before the rollover is signed, and it is why the plan’s own Roth account — a separate, clean account — does not pro-rate against the pre-tax balance the way an IRA does.
And the bracket question returns, in the present tense. Rolling pre-tax 401(k) money into a Roth IRA pays the current bracket now and nothing later. If the expected retirement bracket is lower than the current one, the rollover pays the higher rate on purpose, and the deferral arithmetic says the same thing: the bracket decides, the form follows.
The One Question, Answered
The vehicle is funded. The limits are dated — Notice 2025-67, the 2026 figures. The match is counted — the plan’s fixed return, not the market’s. And the one question that decides it is the bracket: the current one, and the one expected at retirement. At the flip — the current marginal bracket — the answer changes from pre-tax to Roth, and it is a number you can look up in 2026, not a feeling. When the vehicle is funded, the number is next: how much it has to hold to pay for the retirement. That is the retirement number, and it is the article next to this one.