The 401(k) and IRA serve complementary roles in retirement planning, yet most workers default to one without understanding the optimal sequencing. The 401(k) offers $23,500 in annual contribution room (2026 limit) plus employer matching, while the IRA provides $7,000 in contributions with unlimited investment choices and typically lower fees.
The optimal contribution order for most workers: contribute to the 401(k) up to the employer match threshold (capturing the instant 50-100% return), then max the Roth IRA ($7,000) for its tax-free growth and no-RMD advantages, then return to the 401(k) to reach the $23,500 limit. Self-employed individuals have additional options including Solo 401(k) plans with $70,000 total contribution capacity and SEP-IRAs allowing 25% of net self-employment income.
SECURE 2.0 provisions including the super catch-up contribution ($34,750 for ages 60-63), mandatory Roth catch-up for high earners, and automatic enrollment requirements are reshaping the 401(k) landscape for 2026 and beyond.
-Rocky
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Originally published on WealthWise OS.