How Much To Contribute To Your 401(k) vs. a Roth IRA If You Can’t Max Them Out
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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You’re contributing to your 401(k) and trying to save for a Roth IRA, but your paycheck only goes so far. How do you decide where each dollar should go?
Even if you can’t max out both accounts, experts say how you split your contributions can have a big impact on your long-term returns and tax savings. The key is knowing how these two accounts differ and which one deserves priority based on your income, tax bracket and employer benefits.
The Difference Between Them
While the most important thing is that you’re contributing something to any retirement account, there are key differences between the two leading options: the 401(k) and the Roth IRA.
A 401(k) is an employer-sponsored plan funded with pretax contributions, which lowers your current taxable income. A Roth IRA, on the other hand, is funded with after-tax dollars, but withdrawals are tax-free in retirement.
You’ll need to weigh factors like your tax bracket, whether your employer offers a match and your long-term growth goals to determine the right balance. But according to Evan Potash, executive wealth management advisor at TIAA, and Sharad Gondaliya, CPA, there’s a clear order of operations that can help you make the most of limited savings.
Always Grab the Employer Match First
If your employer offers a match, this is essentially free money. “Try to prioritize savings in your 401(k), especially if there is a company match. You do not want to leave free money on the table,” Potash said.
Another way to think of it, Gondaliya added, is that this match “gives you an immediate, guaranteed return that no other investment offers.”
If your employer matches 50% of the first 6% of your salary, contributing 6% yields an instant 3% return. That’s a hard deal to beat.
Compare Today’s Tax Breaks vs. Tomorrow’s Tax-Free Growth
Next, consider whether it’s smarter to take a tax break now or enjoy tax-free withdrawals later. Your current tax rate versus what you expect in retirement determines whether pretax or Roth contributions make the most sense, Potash pointed out.
“Are you in a high tax bracket today or a low tax bracket? Those in lower tax brackets should consider utilizing some in a Roth IRA or Roth 401(k) especially if you anticipate your future earnings increasing.”
If your income is on the lower side, under $60,000, Gondaliya suggested putting about 60% of your savings in a Roth IRA and 40% in a 401(k). Those earning between $60,000 and $120,000 can aim for an even split, while higher earners should favor the 401(k) to reduce taxable income now.
This balance creates what’s known as tax diversification — having both pretax and post-tax savings — which helps protect against future tax rate hikes and gives you more flexibility in retirement.
Your Age and Income Should Guide the Split
Your age also plays a big role in how you allocate your retirement funds. “Younger people tend to make less than those in their 40s or 50s. They would be more likely to utilize a Roth IRA,” Potash said. Older workers, meanwhile, may want to maximize pretax deductions during their peak earning years.
Once your income reaches $150,000 to $165,000 for a single filer in 2025, there’s a phaseout and you’ll no longer be eligible to contribute directly to a Roth IRA, Gondaliya explained. However, there are workarounds — such as Roth contributions within a 401(k) or a “backdoor Roth conversion.”
Those interested in a backdoor conversion need to understand the components involved to avoid taxation, such as the IRS’ pro-rata and aggregation rules. Consulting a financial advisor before making such a move is strongly recommended.
Avoid Common Mistakes
When it comes to retirement investing, don’t think in absolutes. As Potash said, “it’s not all or nothing. You can add some to pretax and some to Roth.”
Gondaliya warned that the biggest mistakes are ignoring the employer match and underestimating the power of small, regular contributions. Another common misstep is failing to understand future required minimum distribution (RMD) rules, Potash said.
He’s seen many well-funded clients oversave in pretax accounts and under save in Roth accounts. “This can push them into a higher tax rate than they anticipate in the future due to increasing RMDs. It can also affect the tax liability for their beneficiaries since many individuals (typically children) only have 10 years to draw down those pretax assets.”
Start Small, Stay Consistent
Don’t get too hung up on how much you’re contributing to retirement. “Any amount is helpful,” Potash said. “Your savings today will continue to grow and compound over time.”
Even modest, well-balanced contributions can grow into lifelong financial freedom. The trick is to start now and keep going — because when it comes to retirement, consistency beats perfection every time.
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