Despite both being called “Roth,” Roth IRAs and Roth 401(k)s offer very different pathways to tax-free withdrawals in retirement. Here’s what you need to know about these 2 accounts and how they can help save for retirement.
Similarities and differences between a Roth IRA and Roth 401(k)
Tax treatment
Roth 401(k)s and Roth IRAs let you save and invest dollars you've already paid taxes on and potentially make tax-free withdrawals (including any investment earnings) once you're 59½ or older and at least 5 years have elapsed since the beginning of the tax year of your first contribution.
With traditional IRAs and 401(k)s, you typically make contributions with pre-tax dollars (or you may be able to deduct your contributions from your taxable income). Then investments can grow tax-deferred, and you pay income taxes on what you withdraw in retirement.
Income restrictions
You can open and contribute to your Roth IRA as long as you have a taxable income under the yearly IRS limits.
For 2026, you can make full contributions to your Roth IRA if your modified adjusted gross income (MAGI) is less than $153,000 for a single adult, partial contributions for MAGI between $153,000 and $168,000 and no contributions with a MAGI $168,000 or higher.
Married couples filing jointly for 2026 can make the maximum contribution if their MAGI is less than $242,000. They can make partial contributions if their 2026 MAGI is more than $242,000 but less than $252,000. Married couples filing jointly whose 2026 MAGI is $252,000 or higher can't contribute directly to a Roth IRA.
You can calculate your MAGI as follows: gross income minus tax credits, adjustments, and deductions, with some of those credits, adjustments, and deductions added back in.
Roth 401(k)s, meanwhile, have no income limits. If your employer offers a Roth option, you can contribute no matter your income up to the greater of the plan's limits or the 401(k) deferral limit. If your employer doesn't offer a Roth employer retirement plan but you earn too much to contribute to a Roth IRA, you may consider a backdoor Roth IRA, which lets you convert nondeductible traditional IRA contributions into a Roth account.
Contribution limits
Contribution limits for Roth IRAs and Roth 401(k)s are very different. You can potentially save much more per year using a Roth 401(k) than a Roth IRA.
Here’s how the contribution limits compare for 2026:
The annual contribution limit for IRAs, including Roth and traditional IRAs, is $7,500 for 2026. If you're age 50 or older, you can contribute an additional $1,100 for 2026.
In 2026, you can contribute up to $24,500 pre-tax or Roth to your 401(k). Some plans may allow after-tax contributions up to the combined employee and employer limit of $72,000. If you're at least age 50 at the end of the calendar year, you can add a pre-tax or Roth catch-up contribution of $8,000 (or $11,250 if age 60–63).
According to the SECURE 2.0 Act's higher earner rule, in 2026, catch-up contributions for earners whose FICA wages (typically Box 3 of Form W-2) exceed $150,000 in the previous tax year, must be designated as Roth after-tax contributions.
If your employer's plan does not offer a Roth contribution feature and you fall under the high-earner rule, you won't be able to make catch-up contributions to that plan.
Withdrawals before retirement
With most retirement accounts, you can’t access the money you contribute or any investment earnings before retirement age without incurring a 10% early withdrawal penalty, plus any applicable income taxes.
One appealing trait of Roth IRAs is that you can withdraw your contributions before retirement without tax or penalty. If you're under age 59½, you can withdraw investment earnings from your Roth IRA without tax or penalty as long as you have met the required 5-year aging period, and you're disabled or using for funds for a first-time home purchase up to $10,000.1 Otherwise, you may be on the hook for the standard 10% early withdrawal penalty plus any applicable income taxes on previously untaxed dollars (i.e., your investment earnings).
Related: Roth IRA withdrawal rules
With a Roth 401(k), the rules get a bit more complicated. For a Roth 401(k), you may be able to avoid early withdrawal penalties2 if the withdrawals qualify as a hardship withdrawal provided certain conditions are met.3 If your plan allows you to make a non-hardship early withdrawal from your Roth 401(k), you'll likely need to make a "prorata" withdrawal that combines contributions and earnings and represents a proportion of earnings each contributed dollar has made. This means you’d have to make a withdrawal that includes your previously untaxed earnings, which might be taxed or penalized, depending on the situation for your withdrawal.
While that makes early Roth 401(k) withdrawals more complicated, the Roth 401(k) does hold a unique advantage over the Roth IRA for early withdrawals. If you part ways with the company sponsoring your Roth 401(k) after you turn 55, you can access its contents for an early withdrawal penalty-free. Keep in mind that early withdrawals made from any type of retirement account miss out from potential future investment earnings.
Withdrawals during retirement
Once you reach age 59½ and you've met the required 5-year aging period on your Roth, you're eligible to take out your earnings without tax or penalty. If you haven't met the required 5-year aging period, your earnings would be subject to tax but not the 10% early withdrawal penalty.
Accessibility
If you meet the income guidelines, you can open a Roth IRA at a financial institution, such as Fidelity. On the other hand, you can only save through a Roth 401(k) if your employer offers this type of plan. If you’re self-employed, it’s possible to open a small-business retirement plan, like a solo 401(k), to access Roth-related benefits.
Employer contributions and matches
With employer-sponsored retirement plans, like Roth 401(k)s, your company may make contributions on your behalf. These may take the form of outright contributions or profit sharing, which don’t require you to contribute anything, or they may be what are known as matching contributions, which require you to contribute a certain amount yourself that your employer then matches as a preset percentage or amount.
SECURE Act 2.0 allowed employers the option to make employee matching contributions as pre-tax or Roth. Roth employer matching contributions are included in your income so you want to make sure you have enough withholding to cover the tax. Not all employers allow Roth matching contributions. You may need check with your plan to make sure they're available. If your plan doesn't offer Roth matching, you may be eligible to transfer your pre-tax matching contributions to a Roth once they're fully vested if it's an option in your plan. (Note: To date, employer matches are very rare but may become more popular over time.)
Investment selection
You may find a wide range of investment options when you invest with a Roth IRA over a Roth 401(k).
With a Roth 401(k), you’re limited to the investments your employer chooses to include in its plan's investment lineup. But because you can open a Roth IRA at a wide range of financial institutions and robo advisors, you can choose one that offers what you prefer to invest in.
Plan loans
While not all employers offer the option, your Roth 401(k) could give you the ability to borrow from your account through a 401(k) loan. If this option is available, you could borrow up to 50% of your balance up to $50,000. In most cases, if you don't pay the loan back within 5 years or you're unable to repay within a preset amount of time when you leave your company, your loan counts as a withdrawal and could be subject to taxes and penalties.
Roth IRAs don't offer a similar feature, though you do have the option of withdrawing contributions tax-free at any time. Keep in mind that withdrawing from a Roth IRA or Roth 401(k), even through a loan, may cause you to miss out on investment growth.
Required minimum distributions (RMDs)
Almost all retirement accounts are subject to forced distributions called required minimum distributions, or RMDs. These kick in when you turn 73 or stop working at the job offering the plan (unless you own 5% or more of the business sponsoring the plan), whichever comes later, and they must be withdrawn, whether you need the money or not. Otherwise, you may owe a tax penalty equal to 25% of the amount you were supposed to have withdrawn. If, however, you correct your mistake and take your RMD within 2 years of when you were intended to, then the penalty is further reduced to 10%.
Roth IRAs and Roth 401(k)s aren't subject to RMDs during the owner's lifetime. This could make Roth accounts more popular in estate planning, as they could benefit from potential compound growth by remaining undisturbed for a longer period and can be inherited without requiring the beneficiary to pay taxes on withdrawals. For inherited Roth IRAs, withdrawals are tax-free as long as the original owner met the 5-year aging requirement.
Can you have a Roth 401(k) and Roth IRA?
Yes. If you have a Roth 401(k) at work and you meet the income requirements to contribute to a Roth IRA, you can contribute to both. How you plan contributions to each depends on your financial goals. Be sure to consider the benefits and limitations of each type of account, detailed above, when deciding how much to save in each.