Can You Contribute to Both a 401(k) and a Roth IRA?

Navigating retirement savings often involves questions about combining different account types. A common inquiry is whether one can contribute to both an employer-sponsored 401(k) and an individual Roth IRA simultaneously. Understanding how these distinct retirement vehicles operate and interact is a valuable step toward maximizing long-term savings and preparing for future financial security.

Understanding Key Retirement Accounts

A 401(k) plan is a retirement savings vehicle typically sponsored by an employer. It offers two main variations: the traditional 401(k) and the Roth 401(k). With a traditional 401(k), contributions are made with pre-tax dollars, which can reduce an individual’s current taxable income. The money in a traditional 401(k) grows tax-deferred, meaning taxes are paid only upon withdrawal in retirement.

Conversely, a Roth 401(k) is funded with after-tax contributions, so there is no immediate tax deduction. Qualified withdrawals in retirement, including all earnings, are completely tax-free. Employer matching contributions, if offered, are generally made on a pre-tax basis into the 401(k) plan, even if an employee’s own contributions are to a Roth 401(k).

An individual Roth IRA functions differently from a 401(k). Contributions to a Roth IRA are always made with after-tax dollars, similar to a Roth 401(k). The earnings within a Roth IRA grow tax-free, and qualified withdrawals in retirement are also tax-free, provided the account has been open for at least five years and the owner is age 59½ or older. A notable feature of Roth IRAs is the absence of required minimum distributions (RMDs) for the original owner during their lifetime, offering greater flexibility in managing retirement income.

Contribution Rules and Limits

An individual can generally contribute to both a 401(k) and a Roth IRA in the same calendar year. The Internal Revenue Service sets separate annual contribution limits for each type of account, and contributing to one does not typically reduce the amount that can be contributed to the other, with specific income-based exceptions for Roth IRAs.

For 2025, the maximum amount an employee can contribute to a 401(k) plan is $23,500. Individuals aged 50 and over are eligible for an additional catch-up contribution of $7,500, bringing their total employee contribution limit to $31,000. A new provision for those aged 60 to 63 allows an even higher catch-up contribution of $11,250, making their total employee contribution limit $34,750 for the year. Employer contributions, such as matching funds, are separate from these employee limits; combined employee and employer contributions can reach $70,000 for 2025, or more with catch-up contributions. These employee contribution limits apply across all 401(k) accounts an individual might have, even if through different employers.

For Roth IRAs in 2025, the contribution limit is $7,000, with an additional $1,000 catch-up for those aged 50 and over. However, direct contributions are subject to Modified Adjusted Gross Income (MAGI) limitations. For single filers, contributions phase out between $150,000 and $165,000 MAGI; for married filing jointly, between $236,000 and $246,000. Contributions cannot exceed earned income. High-income earners exceeding these limits may utilize a “backdoor Roth IRA” strategy.

Strategic Advantages of Dual Contributions

Contributing to both a 401(k) and a Roth IRA offers a strategic approach to retirement planning by enabling tax diversification. This involves holding retirement assets in accounts with different tax treatments, such as pre-tax (traditional 401(k)) and after-tax (Roth 401(k), Roth IRA) savings. This diversification provides significant flexibility in retirement, allowing individuals to manage their tax liability more effectively.

By having a mix of account types, retirees can strategically choose which accounts to draw from based on their income and the prevailing tax rates in retirement. For instance, withdrawals from a traditional 401(k) would be taxable, while qualified withdrawals from a Roth IRA would be tax-free. This ability to select the source of income can help manage overall taxable income, potentially keeping individuals in lower tax brackets and influencing factors such as Medicare premium surcharges.

Utilizing both a 401(k) and a Roth IRA also allows for a higher overall savings capacity each year, enabling individuals to accumulate a larger retirement nest egg than they might with only one type of account. Individuals can also take advantage of employer matching contributions in a 401(k), benefiting from additional funds and the tax-free growth and withdrawals of a Roth IRA. This combined approach can optimize future retirement income and mitigate potential tax burdens.