In short
For 2026 you can defer $24,500 into a 401(k) ($32,500 at 50+, $35,750 at 60–63) and put $7,500 into IRAs ($8,600 at 50+). Fund the 401(k) to the full employer match first, then choose traditional (deduct now, taxed later) or Roth (taxed now, tax-free later) by comparing today's bracket with your expected retirement rate. The traditional IRA deduction phases out from $81,000 (single) or $129,000 (joint) if you have a workplace plan, and direct Roth IRA contributions phase out from $153,000 or $242,000.
A 401(k), a traditional IRA and a Roth IRA are three containers for the same investments; what differs is who can contribute, how much, and when the tax is paid. This guide sets out the 2026 limits, how an employer match works and why it comes first, how to choose between pre-tax and Roth, the income phase-outs that quietly remove the IRA deduction or the Roth itself, and what an early withdrawal really costs. By the end you will be able to decide the order in which to fund each account.
Open the 401(k) contribution & employer match calculator →
2026 contribution limits
The IRS raised most limits for 2026. The figures below are per person; the 401(k) employee limit is shared across every employer plan you contribute to in the year, and the IRA limit is shared between traditional and Roth IRAs.
| Account | Under 50 | Catch-up at 50+ | Catch-up at 60–63 |
|---|---|---|---|
| 401(k) employee deferral | $24,500 | +$8,000 ($32,500) | +$11,250 ($35,750) |
| 401(k) total incl. employer (§415(c)) | $72,000 | plus catch-up | |
| Traditional or Roth IRA (combined) | $7,500 | +$1,100 ($8,600) | |
| SIMPLE IRA | $17,000 | +$4,000 | |
The employer match comes first
Most plans match a share of what you put in, up to a cap expressed as a percentage of salary. The common formula is 100% of the first 3% of pay plus 50% of the next 2%, so contributing 5% earns a 4% match. On an $85,000 salary that is $4,250 from you and $3,400 from your employer, 9% of salary in total. Contribute only 4% and the match is $2,975; you leave $425 a year on the table for a $850 cut in your own saving. Contributing 6% earns no extra match under this formula; the first 5% is the only slice with a guaranteed 80% return.
Fund the plan to the full match before putting a dollar into an IRA. Employer contributions are always pre-tax, vest on the plan’s schedule, and count toward the $72,000 total rather than your $24,500 deferral limit.
Traditional vs Roth: when the tax is paid
A traditional 401(k) or deductible IRA contribution reduces this year’s taxable income; the withdrawal is taxed as ordinary income in retirement. A Roth contribution is made from after-tax pay, and qualified withdrawals, including all the growth, are tax-free. If your tax rate is the same now and later, the two are mathematically identical.
Worked example: $7,500 a year for 30 years at 7%, 22% bracket
- Traditional: $7,500 pre-tax a year grows to $708,456 ($7,500 × (1.07^30 − 1) ÷ 0.07). Taxed at 22% on withdrawal: $552,596.
- Roth: the same $7,500 of pre-tax pay is $5,850 after 22% tax. $5,850 a year grows to $552,596, withdrawn tax-free.
- Identical at an equal rate. If the retirement rate is 12%, the traditional route nets $623,441 and wins; at 32% it nets $481,750 and the Roth wins.
This assumes the $1,650 annual tax saving from the traditional contribution is invested, not spent. If you would spend it, the Roth is effectively forcing you to save more.
Practical rules: traditional when you are in the 22% bracket or above and expect a lower rate in retirement, which is most people; Roth when you are in the 10% or 12% bracket, early in your career, or want a pot with no required minimum distributions and no tax on withdrawal. Many savers split. The Roth vs traditional IRA calculator finds the break-even retirement rate for your own numbers.
Income phase-outs on IRAs
The 401(k) has no income limit. IRAs have two, both on modified adjusted gross income (MAGI).
Traditional IRA deduction
If neither you nor your spouse has a workplace plan, the full contribution is deductible at any income. If you are covered by a plan, the deduction phases out between $81,000 and $91,000 (single or head of household) or $129,000 and $149,000 (married filing jointly). If only your spouse is covered, your deduction phases out between $242,000 and $252,000. Married filing separately loses it between $0 and $10,000.
A single filer with a 401(k) and $85,000 of MAGI is 40% through the $10,000 range, so $7,500 × (1 − 0.4) = $4,500 is deductible, saving $990 at 22%. The remaining $3,000 could still go in as a non-deductible contribution, but it is usually better placed in a Roth IRA. The IRA deduction calculator handles each coverage case.
Roth IRA contribution
The right to contribute directly phases out between $153,000 and $168,000 (single or head of household) and $242,000 and $252,000 (married filing jointly). A single filer at $160,000 is 46.7% through the range and may contribute $7,500 × (1 − 0.467) = $4,000. Above the range, the backdoor Roth, a non-deductible traditional contribution converted to Roth, has no income limit, but the pro-rata rule taxes the conversion in proportion to any pre-tax IRA balances you already hold. Check your limit with the Roth IRA income limit calculator.
| 2026 phase-out (MAGI) | Single / head of household | Married filing jointly |
|---|---|---|
| Traditional IRA deduction, covered by a plan | $81,000 – $91,000 | $129,000 – $149,000 |
| Traditional IRA deduction, only spouse covered | — | $242,000 – $252,000 |
| Roth IRA contribution | $153,000 – $168,000 | $242,000 – $252,000 |
Lower earners get a bonus: the Saver’s Credit returns 50%, 20% or 10% of up to $2,000 of contributions per person, for AGI up to $40,250 single, $60,375 head of household or $80,500 joint. A head of household on $38,000 who puts $2,400 into a 401(k) gets 20% of $2,000, a $400 credit on top of the deduction.
Early withdrawals: the real cost
Taking money from a pre-tax account before age 59½ triggers ordinary income tax plus a 10% additional tax, and employer plans must withhold 20% up front. A 42-year-old single filer with $70,000 of other income who withdraws $30,000 from a 401(k) pays $6,600 of extra federal tax (the $30,000 lands in the 22% bracket), a $3,000 penalty and about $1,500 of state tax at 5%, keeping $18,900. Left to grow at 7% for 23 years, the $30,000 would have been about $142,000.
The penalty, never the income tax, is waived in specific cases: separation from service in or after the year you turn 55 (employer plans only), substantially equal periodic payments under 72(t), disability, medical expenses above 7.5% of AGI, up to $1,000 a year for emergencies, $5,000 for a birth or adoption, $10,000 for domestic-abuse victims, $22,000 after a federally declared disaster, and for IRAs only, $10,000 toward a first home and qualified education costs. Roth contributions (not earnings) can be taken out at any time without tax or penalty. The 401(k) early withdrawal calculator prices your own case.
Common mistakes
- Contributing below the match cap. On $85,000, 4% instead of 5% forfeits $425 of employer money every year.
- Front-loading and losing match. Some plans match per paycheck; hitting $24,500 by August can stop the match for the rest of the year unless the plan has a true-up.
- Assuming a 401(k) blocks the IRA. It only limits the deduction above $81,000 single or $129,000 joint; a Roth IRA is still open up to $153,000 or $242,000.
- Putting $7,500 into both a traditional and a Roth IRA. The $7,500 is one combined limit.
- Doing a backdoor Roth with an old pre-tax IRA. The pro-rata rule taxes most of the conversion; roll the pre-tax balance into a 401(k) first.
Frequently asked questions
What is the 401(k) contribution limit for 2026?
$24,500 of employee deferrals, plus a catch-up of $8,000 at age 50 or over, or $11,250 at ages 60 to 63. Employee plus employer contributions are capped at $72,000 before catch-ups.
Can I contribute to both a 401(k) and an IRA?
Yes. The $24,500 and $7,500 limits are separate. Having a 401(k) only affects whether the traditional IRA contribution is deductible, which phases out between $81,000 and $91,000 of MAGI for single filers.
Is Roth or traditional better?
At an equal tax rate they are identical. Traditional wins if your rate in retirement will be lower than today; Roth wins if it will be higher, or if you value tax-free flexibility and no required minimum distributions.
What are the Roth IRA income limits for 2026?
Direct contributions phase out between $153,000 and $168,000 of MAGI for single and head of household filers, and $242,000 to $252,000 for married filing jointly. Above that, a backdoor Roth conversion has no income limit.
What does an early 401(k) withdrawal cost?
Ordinary income tax at your marginal rate plus a 10% penalty, with 20% withheld up front. A $30,000 withdrawal at 42 on $70,000 of other income nets about $18,900 after federal tax, the penalty and 5% state tax.
Sources
- IRS — 401(k) and profit-sharing plan contribution limits; Notice 2025-67 — $24,500 deferral, catch-ups, $72,000 and $360,000 limits, checked 8 October 2026.
- IRS — Retirement topics: IRA contribution limits — $7,500 / $8,600, checked 8 October 2026.
- IRS Notice 2025-67 (§219(g), §408A(c)(3), §25B) — traditional IRA deduction and Roth phase-outs, Saver’s Credit AGI limits, checked 9 October 2026.
- IRS — Retirement Topics: exceptions to tax on early distributions; IRC §72(t) — 10% additional tax and exceptions, checked 27 October 2026.
- IRS — Tax year 2026 inflation adjustments (IR-2025-103) — 2026 brackets used in the examples, checked 8 October 2026.