Can I Contribute to a 401k and Roth IRA?

For individuals planning their financial future, a common question arises regarding contributing to multiple retirement accounts simultaneously. Many seek to understand if they can combine the benefits of an employer-sponsored 401(k) with a personal Roth IRA. This article clarifies the rules and distinctions surrounding contributions to both a 401(k) and a Roth IRA, addressing the possibilities for dual contributions.

401(k) Contribution Rules

Employer-sponsored 401(k) plans allow employees to contribute a portion of their salary directly from their paycheck. These plans offer both traditional and Roth 401(k) options, each with distinct tax treatments. Traditional 401(k) contributions are pre-tax, reducing taxable income in the year they are made. In contrast, Roth 401(k) contributions are made with after-tax dollars, which do not lower current taxable income.

For 2025, employees can contribute up to $23,500 to their 401(k) accounts, whether traditional or Roth, or a combination. Individuals aged 50 and over can make an additional $7,500 catch-up contribution, bringing their total employee limit to $31,000. Under the SECURE 2.0 Act, those aged 60 to 63 may be eligible for an even higher catch-up contribution of $11,250, if their plan allows, for a potential total of $34,750.

Beyond employee contributions, employers often contribute to 401(k) plans through matching contributions or profit-sharing. These employer contributions do not count against the employee’s individual contribution limit. The total combined contributions from both employee and employer are subject to a separate, higher limit: $70,000 for 2025, or $77,500 for those aged 50 and over. For those aged 60-63 with the enhanced catch-up, the limit is up to $81,250. Eligibility to participate in a 401(k) plan is generally determined by the employer’s plan rules, often requiring a certain period of service or age.

Roth IRA Contribution Rules

Roth IRAs are individual retirement arrangements funded with after-tax contributions, allowing for tax-free withdrawals in retirement. For 2025, the direct contribution limit for a Roth IRA is $7,000. Individuals aged 50 and over can contribute an additional $1,000 as a catch-up contribution, increasing their total annual limit to $8,000.

Roth IRA contributions are subject to Modified Adjusted Gross Income (MAGI) phase-out limits, which can restrict or eliminate direct contributions. For single filers and heads of household, the ability to make a full Roth IRA contribution begins to phase out if their MAGI is between $150,000 and $165,000 in 2025. If their MAGI reaches or exceeds $165,000, they are generally ineligible to make direct contributions.

For married couples filing jointly, the MAGI phase-out range for 2025 is between $236,000 and $246,000. If their MAGI is $246,000 or higher, they cannot make direct Roth IRA contributions. Spousal Roth IRA contributions are permitted, meaning a spouse with little or no earned income can contribute based on the working spouse’s earned income, provided MAGI requirements are met and there is sufficient earned income to cover both contributions.

Contributing to Both Accounts Concurrently

It is permissible for an individual to contribute to both an employer-sponsored 401(k) plan and a Roth IRA in the same tax year. The contribution limits for each account type are independent. This means contributing the maximum allowable amount to a 401(k) does not reduce the amount an individual can contribute to a Roth IRA, and vice versa.

This independence allows individuals to diversify their retirement savings strategies by utilizing both pre-tax and after-tax savings vehicles. For instance, an individual could contribute the maximum to their traditional 401(k) to reduce their current taxable income, while also contributing to a Roth IRA to build a source of tax-free income in retirement. Alternatively, they might contribute to a Roth 401(k) and a Roth IRA, accumulating a substantial pool of tax-free retirement funds.

While 401(k) contributions do not directly affect Roth IRA contribution limits, pre-tax 401(k) contributions can indirectly impact Roth IRA eligibility by lowering an individual’s Adjusted Gross Income (AGI). A lower AGI can help individuals whose income is near the Roth IRA phase-out thresholds remain eligible for direct contributions. Strategic use of pre-tax 401(k) contributions can therefore preserve an individual’s ability to contribute to a Roth IRA when their income would otherwise exceed the limits.

Distinctions Between 401(k) and Roth IRA for Contributors

Both 401(k)s and Roth IRAs are valuable retirement savings tools, but they have key distinctions. Traditional 401(k) contributions are pre-tax, reducing current taxable income. Roth 401(k) and Roth IRA contributions are after-tax, offering tax-free growth and withdrawals in retirement. This choice impacts an individual’s current versus future tax burden.

A significant distinction is the ability to receive employer contributions. Only employer-sponsored 401(k) plans can receive contributions from an employer, such as matching contributions or profit-sharing. Individual Retirement Arrangements (IRAs), including Roth IRAs, do not allow for employer contributions.

Withdrawal rules also differ between account types. For qualified withdrawals, both Roth 401(k)s and Roth IRAs require the account holder to be at least age 59½ and to have held the account for at least five years. Traditional 401(k) withdrawals are taxable upon distribution and face penalties if taken before age 59½.

Required Minimum Distributions (RMDs) are another difference. Traditional 401(k)s are subject to RMDs, meaning account holders must begin taking distributions at age 73. The SECURE 2.0 Act eliminated RMDs for Roth 401(k) accounts during the original owner’s lifetime, effective in 2024. Original owners of Roth IRAs are not subject to RMDs during their lifetime, allowing funds to grow tax-free indefinitely.