What's the difference between a 401(k) and an IRA?
401(k)
Employer-sponsored. Offered through your workplace, with contributions typically deducted directly from your paycheck. Many employers offer a matching contribution up to a certain percentage. Available in traditional (pre-tax) and, at many employers, Roth (after-tax) variants.
IRA
Individual. Opened on your own through a brokerage, independent of any employer. You control the investment choices directly. Available as a traditional (pre-tax, tax-deductible depending on income) or Roth (after-tax) IRA.
The core mechanical difference is who sets it up and administers it — a 401(k) exists because your employer offers a plan and you enroll in it, while an IRA is an account you open yourself with any brokerage. Both share the same basic tax-advantaged idea (either you avoid tax now and pay it on withdrawal with traditional accounts, or you pay tax now and withdraw tax-free later with Roth accounts), but they have separate, independent annual contribution limits — meaning contributing the max to a 401(k) doesn't reduce how much you can also put into an IRA in the same year (subject to IRA income-based deduction/eligibility rules, which are a separate topic from the contribution limits below).
2026 401(k) contribution limits
| Category | 2026 limit |
|---|---|
| Employee elective deferral limit | $24,500 |
| Catch-up contribution (age 50+) | +$8,000 (total $32,500) |
| Enhanced "super" catch-up (ages 60-63) | +$11,250 (total $35,750) |
The $24,500 figure is up from $23,500 in 2025. The standard age-50-and-over catch-up contribution is $8,000 for 2026 (up from $7,500 in 2025), bringing the total possible employee contribution to $32,500 for most people 50 or older. Under SECURE 2.0, employees who turn 60, 61, 62, or 63 during the year get an enhanced catch-up limit instead of the standard one — $11,250 for 2026 — for a total of $35,750, if their specific plan permits it.
2026 IRA contribution limits
| Category | 2026 limit |
|---|---|
| Contribution limit (traditional or Roth, combined) | $7,500 |
| Catch-up contribution (age 50+) | +$1,100 (total $8,600) |
The $7,500 IRA limit is up from $7,000 in 2025. This limit applies across your traditional and Roth IRA contributions combined — you can split contributions between both types, but the total across both cannot exceed $7,500 (or $8,600 with the age-50+ catch-up). Note that Roth IRA eligibility phases out at higher income levels, and traditional IRA tax-deductibility can also be limited by income if you (or your spouse) are covered by a workplace plan — those income-based rules are separate from the contribution limits above.
Source: Internal Revenue Service, "401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500" (IR-2025-111), published November 13, 2025 — irs.gov. These figures were verified directly against this official IRS announcement.
Which one should I prioritize?
This is a common question without a single universal answer, but a frequently cited general framework (not personalized advice) is: contribute enough to your 401(k) to get your full employer match first if one is offered — that's an immediate, guaranteed return on your contribution that an IRA can't replicate — then consider maxing out an IRA for potentially lower fees or wider investment choice, and finally return to maxing out the rest of your 401(k) if you're able to save more. Whether this order makes sense for you depends on your specific plan's investment options, fees, employer match structure, and tax situation.
Frequently asked questions
Can I contribute the max to both a 401(k) and an IRA in the same year?
Yes, in general — the two accounts have separate, independent contribution limits. A person under 50 could contribute up to $24,500 to a 401(k) and up to $7,500 to an IRA in 2026, for a combined $32,000, subject to any income-based IRA eligibility rules that apply to your specific situation.
What's the new "super catch-up" for ages 60-63?
Under SECURE 2.0 provisions, employees who turn 60, 61, 62, or 63 during the calendar year are eligible for a higher 401(k) catch-up contribution limit than the standard age-50+ catch-up — $11,250 for 2026 instead of $8,000 — if their employer's plan allows it. This is specific to 401(k)-type plans, not IRAs.
Do these limits change every year?
Yes. The IRS adjusts most retirement contribution limits annually for inflation, and the exact figures are typically announced in the fall for the following tax year. Always check the current year's limit rather than relying on a prior year's figure — this guide reflects tax year 2026 limits specifically.
Does contributing to a 401(k) or IRA affect my paycheck's take-home pay calculation?
Yes — pre-tax (traditional) contributions reduce your taxable income, which lowers your federal tax withholding. This site's paycheck calculator includes a pre-tax deductions field where you can enter a per-paycheck 401(k) or similar contribution to see its effect on your take-home pay.