Can You Have a 401(k) and an IRA?

It is possible to simultaneously have both a 401(k) plan and an individual retirement account (IRA). You can contribute up to the annual limit to each account, allowing you to maximize your retirement savings. However, your ability to take a tax deduction for your IRA may be limited, depending on factors like your income and whether your spouse has an employer-sponsored retirement plan.

A financial advisor can help you make a retirement plan that maximizes the benefits of both 401(k)s and IRAs.

Advantages of Having a 401(k) and an IRA

The benefit of having both a 401(k) and a traditional IRA is the higher contribution limits for retirement savings. These funds can then grow tax-deferred.

Each year, the IRS sets contribution limits for 401(k)s and IRAs. Though you may not be able to claim a tax deduction on all your contributions, you can max out each type of account in the same tax year.

The IRS also permits those at least 50 years old to make additional catch-up contributions into each account. You can contribute even more if your company offers 401(k) matching.

These are the contribution limits for 401(k)s and IRAs for 2026. ¹

401(k) Contribution Limits for 2026

It’s important to note that 401(k) participants between ages 60 and 63 can make super catch-up contributions of up to $11,250, instead of just $7,500.

An employer match in a 401(k) arrangement can significantly boost your retirement savings. However, employers that contribute to their employees’ 401(k) plans typically impose certain rules around company matches. Therefore, it’s a good idea to contribute at least your employer’s match to your 401(k).

Your company may also require a vesting period. This is a minimum period that you must work at the company before you fully own the contributions your firm makes to your account.

That said, if you’re a highly compensated employee, your employer may place stricter limits on your 401(k) contributions. This is because federal law regulates employer-sponsored retirement plans to prevent higher-earning employees from benefiting more from tax advantages than their lower-earning counterparts.

Because of these federal protections, companies offering 401(k)s must conduct means testing.

IRA Contribution Limits for 2026

Contribution limits for IRAs are a bit more straightforward.

For 2026, you can contribute up to $7,500. ² If you are at least 50 years old, you can contribute up to $8,600, thanks to an $1,100 catch-up contribution.

Disadvantages of Having a 401(k) and IRA

Under most circumstances, the IRS permits you to make tax-deductible contributions to your IRA, up to the annual limit. However, your 401(k) contributions may lower the amount of tax-deductible IRA contributions that you can make.

The total you can contribute depends on two factors:

• Your modified adjusted gross income (MAGI)
• Whether your spouse is covered by an employer-sponsored retirement plan

To ensure you maximize your tax-deductible contributions, consider working with a retirement financial advisor.

2026 IRA Tax Deduction Limits For Workplace Plans ³

2026 IRA Tax Deduction Limits If No Workplace Plan ⁴

The MAGI thresholds are different if you do not have access to a work-sponsored plan.

Benefits and Disadvantages of an IRA

If you contribute to an employer-sponsored plan like a 401(k), you must choose your investment options from a menu your employer selects. Depending on your company, this investment menu may be considerably small.

However, opening an IRA gives you access to the entire investment world so you can build your retirement savings. A financial advisor can help you construct a personalized investment menu using securities such as these.

• Stocks
• Bonds
• Mutual funds
• Real-estate investment trusts (REITs)

Still, IRA contribution limits are far lower than those set for 401(k) plans. Your company may also limit matching contributions. Because this matching is essentially free money, an IRA falls short here, as well.

Benefits and Drawbacks of a 401(k)

The prospect of employer matches and large contribution limits can give the 401(k) an edge, but it does have its limitations.

For instance, companies typically place stricter restrictions around your funds. No law requires them to allow hardship withdrawals, for example.

Some plans can charge hefty administration fees. Additionally, fund expenses can mount, taking a chunk out of your retirement savings. That’s why it is critical to carefully review all 401(k) fees.

Generally speaking, though, the larger the company, the lower the fees.

How to Decide Where to Put Your Money First

Having access to both a 401(k) and an IRA does not mean you should fund them equally or randomly. The order in which you direct your savings can meaningfully affect how much your money grows over time.

1. 401(k)

Start with your 401(k), but only up to the amount your employer matches. If your company matches 50% of contributions up to 6% of your salary, this means an immediate 50% return on every dollar you put in.

No investment can reliably beat that, so skipping the match to fund an IRA first leaves guaranteed money on the table.

2. IRA

After you capture the full match, shift your focus to your IRA. The reason is access.

An IRA lets you invest in virtually anything, including low-cost index funds, individual stocks, bonds and ETFs. However, most 401(k) plans limit you to a short menu of funds your employer chooses. Some of those funds carry higher fees than what you could find on your own.

Funding the IRA after securing the match gives you more control over a portion of your retirement savings at potentially lower cost.

3. 401(k)

Once you max out your IRA for the year, go back to your 401(k).

Contribute as much as you can, up to the annual employee limit. With every dollar above the match growing tax-deferred, this makes for a valuable retirement strategy, even without the matching bonus.

If you can afford to max out both accounts in a single year, you will be well ahead of most retirement savers.

What to Do When You Cannot Deduct Your IRA Contribution

If your income pushes you past the deduction thresholds, all is not lost. There are two paths worth considering before giving up on the IRA entirely.

Roth IRA

The first option is a Roth IRA. Unlike a traditional IRA, Roth contributions are made with after-tax dollars, so there is no upfront deduction.

Instead, the payoff comes later. Every dollar in the account grows tax-free, and IRA withdrawals in retirement are also tax-free as long as you meet the holding requirements.

If you cannot deduct a traditional IRA contribution anyway, a Roth IRA is almost always the better choice. A nondeductible traditional IRA contribution still gets taxed on its earnings at withdrawal. A Roth does not.

For 2026, Roth IRA limits are as follows:

• Single filers can contribute to a Roth IRA if their modified adjusted gross income (MAGI) is below $168,000. The contribution phases out between $153,000 and $168,000.
• For married couples filing jointly, the phase-out range is $242,000 to $252,000.

If your income falls within or below these ranges, funding a Roth IRA after capturing your 401(k) match is a strong move.

Backdoor Roth

The second path is for people who earn too much to contribute directly to a Roth IRA. This is where the backdoor Roth comes in.

This strategy works in just two steps.

1. You make a nondeductible contribution to a traditional IRA.
2. You convert that contribution to a Roth IRA.

Because you pay taxes on the money going in, the conversion itself creates little or no additional tax liability as long as you do not have other pretax IRA balances. This is a legal strategy that high earners have used for years, though it requires careful execution to avoid an unexpected tax bill.

If you have existing traditional IRA balances funded with pretax dollars, the conversion math gets more complicated. This is due to the pro rata rule that taxes a proportional share of the conversion based on your total pretax and after-tax IRA balances.

If the pro-rata rule applies to your situation, one strategy is to roll your existing pretax IRA balance into your 401(k) before doing the backdoor conversion. This removes the pretax money from the IRA calculation.

However, not every 401(k) plan accepts incoming rollovers, so check with your plan administrator first.

5 Ways a Financial Advisor Can Help You Use Both Accounts

A financial advisor can give you tips on how to split contributions between a 401(k) and an IRA. Together, you can choose the right type of IRA for your income level while ensuring your overall retirement strategy aligns with your goals.

1. Set the Right Contribution Order for Your Situation

First, an advisor will look at your employer match, income, tax bracket and available cash flow. This will help them determine exactly how much you should put into each account and in what sequence.

Example:

A 34-year-old earning $95,000 has access to a 401(k) with a 4% employer match and wants to open an IRA.

The advisor recommends the following sequence:

1. Contributing 4% to the 401(k) to capture the full match of $3,800
2. Maxing out a Roth IRA at $7,500
3. Directing any remaining savings capacity back into the 401(k)

This order captures the free money first, takes advantage of the Roth’s tax-free growth and uses the 401(k) for additional tax-deferred savings.

2. Determine Whether a Traditional or Roth IRA Makes More Sense

An advisor can compare your current tax bracket to your expected bracket in retirement. They can then recommend whether a traditional or Roth IRA produces the better after-tax outcome over your time horizon.

Example:

A married couple earning $135,000 combined qualifies for a partial traditional IRA deduction.

The advisor runs the numbers and shows that the partial deduction saves them roughly $900 in taxes this year. However, contributing to a Roth IRA instead would produce roughly $45,000 more in tax-free income over 25 years of growth.

The couple chooses the Roth.

3. Execute a Backdoor Roth Without Triggering Unexpected Taxes

An advisor can walk you through the backdoor Roth process step by step to ensure the pro-rata rule does not create a tax bill you did not anticipate.

Example:

A single filer earning $185,000 wants to use the backdoor Roth strategy but has $60,000 in an old traditional IRA funded with pretax dollars.

The advisor explains that converting a new nondeductible contribution to a Roth would trigger taxes on a proportional share of the total IRA balance. This is due to the pro-rata rule.

The advisor recommends rolling the $60,000 pretax balance into the client’s 401(k) first, clearing the way for a clean backdoor conversion with no tax surprise.

4. Review Your 401(k) Investment Options Against What an IRA Offers

An advisor can compare the funds available in your 401(k) to what you could invest in through an IRA.

They will help you decide whether the 401(k) menu is good enough to justify maxing it out. It may be better to shift more toward the IRA, which produces a better portfolio at lower cost.

Example:

A client’s 401(k) offers 12 funds, most of which carry expense ratios above 0.80%.

The advisor compares these to low-cost index funds available through a Roth IRA with expense ratios below 0.10%. They recommend contributing only up to the employer match in the 401(k) and then directing the rest to the Roth IRA. There, the same market exposure will cost a fraction of the price.

Over 30 years, the fee savings alone could add tens of thousands of dollars to the client’s retirement balance.

5. Rebalance Across Both Accounts as a Single Portfolio

An advisor can treat your 401(k) and IRA as one unified portfolio rather than two separate accounts. They can place each type of investment in the account where it is most tax-efficient.

Example:

A client holds both a 401(k) and a Roth IRA.

The advisor places bond funds in the 401(k) because interest income is taxed as ordinary income and the 401(k) defers those taxes. Growth-oriented stock funds are held in a Roth IRA, where the gains will never be taxed.

This asset location strategy does not change the overall allocation but improves the after-tax return over time without incurring any additional costs.

Bottom Line

401(k)s and IRAs can serve as solid retirement savings vehicles. One isn’t necessarily better than the othe, but one may be more preferable, depending on certain individual circumstances.

If your employer offers poorly performing, high-cost investment options, you may want to consider an IRA. However, if you work for a larger company and it offers an employer match, the 401(k) may be more appealing. If you can afford it, contribute to both to help boost retirement savings.

Just be sure to pay close attention to your MAGI, as well as your spouse’s situation if you’re married. Depending on your circumstances, contributions to both can limit your capacity to claim the tax breaks that can accompany your IRA.

Tips on Growing Your Retirement Savings

• A financial advisor can help you allocate your assets across a 401(k), IRA and taxable brokerage accounts. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• When you’re shopping around for an IRA, you should open one with a financial institution that offers robust investment options and low fees. To help narrow down your choices, be sure to review our list of where you can open an IRA in the market today.
• Do you need help setting up and planning your retirement goals? SmartAsset’s retirement calculator can help you figure out how much you will need to save to retire comfortably.

Photo credit: ©iStock.com/KaraGrubis, ©iStock.com/designer491, ©iStock.com/artin-dm