Roth IRA vs 401(k): the early-career playbook
You can do both. But the order to fill them matters — and most early-career workers should lean Roth.
The basic difference
- •401(k) — through your employer. Often comes with a MATCH. 2026 limit: $24,500.
- •Roth IRA — you open it yourself at any broker. 2026 limit: $7,500.
- •Both grow tax-free. The difference is when you pay taxes — Roth pays now, Traditional pays in retirement.
Order of operations
$3,000+/yr
Free money lost without 401(k) match
On a $60K salary with a 5% match, skipping it leaves $3,000 annually on the table — every year you're employed.
Your tax bracket at 23 (12% or 22%) is almost certainly lower than your bracket at peak career or in retirement. Pay taxes now, never again.
Real life: meet Casey's 4-step year
Casey earns $58k at a 5% match company. Plan: 5% to 401(k) ($2,900 + $2,900 match). Pay off $1,800 of 24% APR card debt. Open Roth IRA, max $7,500. Then bump 401(k) to 12% to use slack. Total invested first year: $15,300.
$15,300 invested in year 1
Takeaway
Match → high-APR debt → Roth IRA → max 401(k). Memorize the order. It guides a decade of decisions.
What's the FIRST thing to do with retirement money in your 20s?
Takeaway: The match → debt → Roth → max-401(k) order is the most copy-pastable retirement plan in personal finance.
Try together: Verify the learner is contributing AT LEAST to the full employer match. If not, fix it the same day.