Can You Max Out a Roth IRA and 401(k)?

Many individuals wonder if they can contribute to both a Roth IRA and a 401(k) simultaneously to maximize their long-term savings. These two popular retirement accounts operate under distinct regulations regarding contributions, income eligibility, and tax treatment. This article clarifies the eligibility and contribution limits for each account and explores how they can be combined effectively for retirement planning.

Roth IRA Contribution Eligibility and Limits

A Roth IRA is a retirement savings account where contributions are made with after-tax dollars. Qualified withdrawals in retirement, including both contributions and earnings, are entirely tax-free.

The IRS sets annual contribution limits for Roth IRAs, which can vary based on your age. For 2025, individuals under age 50 can contribute up to $7,000 to a Roth IRA. If you are age 50 or older, you are permitted to make an additional catch-up contribution of $1,000, bringing your total annual contribution limit to $8,000.

Eligibility to contribute directly to a Roth IRA is also subject to Modified Adjusted Gross Income (MAGI) limitations. For 2025, single filers and heads of household can make a full Roth IRA contribution if their MAGI is less than $150,000. The ability to contribute phases out as MAGI increases, becoming completely ineligible for single filers with a MAGI of $165,000 or more. For married couples filing jointly, a full contribution is allowed if their MAGI is less than $236,000, with contributions phasing out for MAGI between $236,000 and $246,000. Married individuals filing separately face a much more stringent MAGI limit, with contributions phasing out completely if their MAGI is $10,000 or more.

401(k) Contribution Eligibility and Limits

A 401(k) is an employer-sponsored retirement plan to save and invest for retirement. These plans come in two forms: traditional 401(k)s, where contributions are pre-tax and grow tax-deferred, and Roth 401(k)s, which accept after-tax contributions and offer tax-free withdrawals in retirement, similar to a Roth IRA. The employee contribution limits generally apply across both traditional and Roth 401(k) options.

For 2025, the employee elective deferral limit for 401(k) plans is $23,500. Individuals age 50 and older are eligible for additional catch-up contributions, which for 2025, allows them to contribute an extra $7,500, bringing their total employee contribution limit to $31,000. A further enhanced catch-up contribution applies for employees aged 60 to 63, allowing them to contribute an additional $11,250, for a total of $34,750.

Beyond employee contributions, 401(k) plans have an overall limit that includes contributions from both the employee and the employer. For 2025, the total combined contribution limit from all sources (employee contributions, employer matching contributions, and profit-sharing contributions) is $70,000. For employees age 50 and older, including their catch-up contributions, this combined limit rises to $77,500. For those aged 60 to 63, the total combined limit can reach $81,250.

Strategies for Combining and Maximizing Retirement Savings

It is generally possible to contribute to both a Roth IRA and a 401(k) in the same year, allowing individuals to significantly increase their overall retirement savings. The contribution limits for Roth IRAs and 401(k)s are distinct and do not typically reduce each other. This separation enables savers to leverage the benefits of both account types, building a diversified retirement portfolio with both pre-tax and tax-free income streams.

Contributing to both accounts offers strategic benefits, including tax diversification. Having funds in a traditional 401(k) (pre-tax) and a Roth IRA (tax-free) provides flexibility in retirement to manage your taxable income. For instance, you could withdraw from your Roth IRA tax-free to cover expenses, potentially keeping your taxable income from other sources lower. This strategy helps mitigate future tax uncertainties, as you will have options regardless of what tax rates may be in the future.

For individuals who cannot afford to max out both accounts, a common prioritization strategy can help optimize contributions. A recommended first step is to contribute enough to your 401(k) to receive the full employer match, if one is offered. This is essentially free money and provides an immediate return on your investment. After securing the employer match, the next step often involves contributing to a Roth IRA up to its annual limit, considering the Modified Adjusted Gross Income (MAGI) rules for eligibility.

Once contributions have been made to the Roth IRA, any additional available funds can then be directed back into the 401(k) beyond the employer match, up to the employee elective deferral limit. This tiered approach ensures that you capture any employer contributions first, then take advantage of the tax-free growth and withdrawals offered by a Roth IRA, and finally maximize your pre-tax or Roth 401(k) contributions. This systematic approach allows for substantial retirement savings while balancing immediate financial capabilities with long-term financial goals.