How Workers Can Use a 401(k) and IRA to Build Retirement Savings

WASHINGTON, Sept. 17, 2026 — Workers can contribute to a 401(k) and an individual retirement account in the same year. Each account has its own contribution limit, allowing eligible workers to save through both accounts. The tax treatment depends on whether the IRA is traditional or Roth.

Traditional 401(k) contributions generally reduce taxable income in the year they are made. Traditional IRA contributions can also qualify for a tax deduction, but workers with a workplace 401(k) may face income limits that reduce or eliminate the deduction.

Contribution Limits

Workers can contribute up to $24,500 to a 401(k) in 2026. Those age 50 and older can make an additional $8,000 catch-up contribution, bringing the total to $32,500. Workers ages 60 through 63 can qualify for a catch-up contribution of up to $11,250, bringing the total to $35,750. The 2026 IRA contribution limit is $7,500, with an additional $1,100 catch-up contribution for workers age 50 and older. Employers can make additional 401(k) contributions or provide matching contributions.

Stacey Chin, chief investment officer and private wealth advisor at Treehouse Wealth Advisors, said the contribution limits for 401(k)s and IRAs are separate. An eligible worker age 49 or younger could therefore contribute up to $32,000 across a 401(k) and traditional IRA. The combined contribution limit is $41,100 for workers age 50 and older and $44,350 for workers ages 60 through 63. A worker who contributes $32,000 to a traditional 401(k) and traditional IRA and pays a 22% tax rate could reduce the current federal income tax bill by $7,040 if the full $32,000 qualifies for the deduction.

Traditional IRA Tax Rules

Workers without access to a workplace 401(k) can make tax-deductible contributions to a traditional IRA regardless of income. Workers who have a 401(k) through their employer face income thresholds that determine whether their traditional IRA contributions qualify for a tax deduction. For 2026, a worker with a 401(k) cannot claim a deduction for a traditional IRA contribution once modified adjusted gross income exceeds $91,000 for an individual or $149,000 for a married couple filing jointly. The deduction phases out for individuals with income between $81,000 and $91,000 and married couples with income between $129,000 and $149,000.

When only one spouse has a 401(k), the traditional IRA deduction phases out for a married couple filing jointly when income is between $242,000 and $252,000. Haley O’Steen, assistant professor of finance at Pepperdine University, said higher-income workers can still contribute to a traditional IRA even when the contribution is not deductible. A non-deductible traditional IRA contribution does not provide the current-year tax deduction available for a deductible contribution.

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Saving with a Roth IRA

Workers can also contribute to a 401(k) and Roth IRA in the same year. Roth IRA contributions are made with after-tax money, so they do not provide a tax deduction in the year of contribution. Qualified Roth IRA withdrawals in retirement are generally tax-free. For 2026, individuals earning less than $153,000 and married couples filing jointly earning less than $242,000 can make the full Roth IRA contribution. The contribution phases out for individuals earning between $153,000 and $168,000 and married couples filing jointly earning between $242,000 and $252,000.

Individuals earning $168,000 or more and married couples filing jointly earning $252,000 or more cannot make a direct Roth IRA contribution for 2026. Roth IRA income limits apply regardless of whether a worker has a 401(k). Workers whose income exceeds the direct Roth IRA limits may use strategies such as a backdoor Roth IRA or mega backdoor Roth, subject to applicable tax and retirement-plan rules. Using a traditional 401(k) and Roth IRA gives retirees access to different tax treatments: traditional 401(k) withdrawals are generally taxable, while qualified Roth IRA withdrawals are generally tax-free.

Choosing Where to Save

Workers who cannot contribute the maximum to both accounts may first consider whether their employer offers a 401(k) match. Chin recommends contributing enough to receive the full employer match, which adds employer contributions to the worker’s retirement savings. Investment choices and fees are also relevant when comparing a 401(k) with an IRA. Chin noted that 401(k) plans can offer fewer investment options than IRAs, while an IRA can give investors more control over investment selection.

After leaving a job, rolling a 401(k) into an IRA may also be an option. Current income and expected retirement income can influence which account provides more favorable tax treatment. Steven Kibbel, a certified financial planner at Kibbel Financial Planning, said pretax savings are not taxed upfront but are generally taxed when withdrawn in retirement. Roth contributions receive different tax treatment because taxes are paid before the money enters the account, while qualified Roth withdrawals can be tax-free.