401(k) vs IRA: Where Should You Save for Retirement First?
A practical guide to prioritizing 401(k), Roth IRA, and traditional IRA contributions with employer match rules.
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Key Takeaways
- 1Always capture the full employer 401(k) match first — it is an instant 50–100% return.
- 2Roth IRA offers tax-free growth; traditional IRA offers a deduction now.
- 3After the match, max IRA then increase 401(k) toward the annual limit.
- 4HSA contributions offer a triple tax advantage if you have a high-deductible plan.
With limited dollars and multiple account types, the order you fund retirement accounts can mean tens of thousands of dollars over a career.
Use our 401(k) calculator to see how employer matching affects your long-term balance.
Step 1: Capture the Full Employer Match
Employer 401(k) matching is an instant 50–100% return. If your employer matches 50% up to 6% of salary, contribute at least 6% before funding anything else.
This is free money — no investment reliably beats it.
Step 2: Max Out Roth or Traditional IRA
After the match, many experts recommend maxing a Roth IRA ($7,000 in 2025, $8,000 if 50+) for tax-free growth.
Read Roth vs traditional IRA to choose based on your current and expected future tax bracket.
Step 3: Return to 401(k) and Beyond
After IRA contributions, increase 401(k) toward the annual limit ($23,500 in 2025). Consider HSA contributions for triple tax benefits.
Automate contributions on payday and increase by 1% each year.
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