401(k) vs IRA: Which Should You Max First?
Got money to save and not sure where it goes first? The order matters — and there's a well-worn priority list that r/personalfinance swears by. Here it is, with the 2026 numbers.
401(k) limit
$24,500
2026 employee deferral
IRA limit
$7,500
2026, separate
Step 1
Get the match
Free money first
Both?
Yes
You can max both
The Priority Order That Wins
The short version, in order:
- Contribute to your 401(k) up to the employer match.
- Max your IRA (Roth or traditional, $7,500).
- Go back and max the 401(k) the rest of the way.
(An HSA slots in right after the match, if you have a high-deductible plan — it's the best tax deal in the code.)
See what pre-tax contributions save you
Plug in your income to see the tax impact.
Step 1: Get the 401(k) Match
If your employer matches contributions (say, 50% up to 6% of salary), that's an instant 50% return on your money before any market growth. Nothing else you can do with your money beats free money. This is always step one — don't leave it on the table.
Step 2: Max the IRA
After the match, an IRA is usually the next best spot: you choose the provider, you get lower fees and better fund selection, and you control whether it's Roth (tax-free later) or traditional (tax break now). The 2026 limit is $7,500 ($8,600 if 50+).
Step 3: Back to the 401(k)
Once the IRA is full, circle back and push your 401(k) toward its $24,500 limit. Yes, the fees might be a bit higher than your IRA, but the tax-deferred (or Roth) growth still beats a taxable brokerage account. This is where high earners park a lot of their savings.
The 2026 Limits
| Account | Under 50 | 50+ |
|---|---|---|
| 401(k) | $24,500 | $32,500 |
| IRA | $7,500 | $8,600 |
| HSA (self-only) | $4,400 | $5,400 |
Frequently Asked Questions
Can I max both a 401(k) and an IRA?
Yes. The limits are separate. You can put $24,500 in your 401(k) and $7,500 in an IRA in the same year.
Why put the IRA before finishing the 401(k)?
Lower fees, more investment choices, and control over Roth vs traditional. The 401(k)'s only unique advantage is the employer match — so once that's captured, the IRA is usually the better next dollar.
What if my 401(k) has no match?
Then skip straight to the IRA first, and use the 401(k) only if you still want to save more beyond $7,500. No match means no step one.
Where does an HSA fit in?
Right after the 401(k) match. It's triple tax-advantaged — tax-free in, tax-free growth, tax-free out for medical. Many people fund it before the IRA.
Sources
- IRS IR-2025-111 — 2026 401(k) limit ($24,500).
- IRS — 2026 IRA limit ($7,500) and HSA limits.
- IRS — employer matching and contribution rules.
This is informational, not investment advice. Your optimal order depends on fees, match, and goals.