401(k) vs IRA: Which Retirement Account Should You Prioritize?

A 401(k) is sponsored through your employer, often includes a matching contribution, and has a significantly higher annual contribution limit. An IRA (Individual Retirement Account) is opened independently through a brokerage, has a lower contribution limit, but often offers a wider range of investment choices than a typical employer plan.

Both come in traditional (pre-tax contributions, taxed on withdrawal) and Roth (after-tax contributions, tax-free qualified withdrawals) versions, giving you flexibility in how you want to manage your tax situation now versus in retirement.

A widely used approach: first, contribute enough to your 401(k) to capture your full employer match, if offered — this is essentially free money and typically the highest guaranteed return available in your financial plan.

Next, consider maxing out an IRA, since it often provides more investment flexibility and control than a typical employer plan. Finally, return to your 401(k) to contribute further, up to its higher annual limit, if you're able to save beyond what the IRA allows.

Skipping an employer match to contribute elsewhere means leaving guaranteed money on the table — no other investment reliably offers an immediate, guaranteed return comparable to a full employer match, which is why this step is almost universally recommended first regardless of other priorities.