Roth ira and roth 401 k limits

Roth accounts are after-tax accounts with unique benefits for retirement savers.

Namely, investments grow tax-free, and withdrawals aren't subject to tax during one's retirement years. But there are some key differences between Roth savings in a 401(k) plan and in an individual retirement account.

Here are some of the biggest.

Contributions

Income

Not everyone can save in a Roth IRA. Investors are ineligible if their annual income exceeds a certain level.

By comparison, Roth 401(k) plans don't have any such income limits. (Some workers may not have a Roth 401(k) option available to them, though.)

In 2021, single taxpayers may contribute the maximum amount to a Roth IRA if their income is less than $125,000. They can't contribute at all once their income is $140,000 or more.

(Married couples who file a joint tax return can contribute the maximum amount if their income is less than $198,000; they can no longer contribute beyond $208,000.)

Regardless of income, workers can roll Roth 401(k) savings to a Roth IRA when they change jobs or retire.

Required minimum distributions

Roth IRAs don't carry annual required minimum distributions for their owners. As a result, savers don't need to withdraw money from the accounts during their lifetimes. (Their heirs do, however.)

Roth 401(k) accounts do require distributions starting at age 72, like savers in traditional, pre-tax retirement accounts. Unlike withdrawals from pre-tax accounts, Roth distributions after age 59½ are tax-free.

Yes, you can contribute to a Roth IRA and a 401(k) at the same time.

Can you have a Roth IRA and a 401(k)?

• You can contribute up to $20,500 in 2022 to a 401(k) plan. If you’re 50 or older, the annual contribution maximum jumps to $27,000.

• You can also contribute up to $6,000 to a Roth IRA in 2022. That jumps to $7,000 if you’re 50 or older.  However, there are income limits, which you can learn more about on our Roth IRA income limits page.

If you can max out both plans, congratulations: You’re well on your way to retirement success.

Advertisement

NerdWallet rating	NerdWallet rating	NerdWallet rating
Learn More	Learn More	Learn More
Fees $0 per trade	Fees 0% management fee	Fees $0 no account fees to open a Fidelity retail IRA
Account minimum $0	Account minimum $0	Account minimum $0
Promotion Up to $600 when you invest in a new Merrill Edge® Self-Directed account.	Promotion Free career counseling plus loan discounts with qualifying deposit	Promotion Get $100 when you open a new, eligible Fidelity account with $50 or more. Use code FIDELITY100. Limited time offer. Terms apply.

How to choose between a Roth IRA and a 401(k)

If you can’t contribute the maximum to both types of accounts, don’t fret. Most of us fall into that group. The ideal amount to save for retirement will vary by your financial situation and your overall goals. Check out our retirement calculator to measure your progress.

If you’re trying to figure out which type of account is the best place for your hard-earned dollars, start here:

• If your employer offers a matching contribution in your 401(k) plan, get as much of that free money as you can.

• Once you’re getting the full match, consider the pros and cons of a Roth IRA versus a 401(k). A lot will depend on the 401(k) you have. Some plans offer a good selection of low-cost investments; others, not so much. Some employers cover the plan’s administrative costs; others pass on those costs to employees. The beauty of an IRA (whether Roth or traditional) is that you can open one at just about any discount broker, with no account fees and access to a wide variety of low-cost investments.

Still not sure which account is best for you?

Does Roth 401k count towards Roth IRA limit?

Can I contribute Max to 401k and Roth IRA?