Roth IRA vs. Roth 401(k) Before You Leave Your Employer

A Roth 401(k) is a Roth account inside an employer plan. A Roth IRA is an individual account you open yourself. Both hold after-tax money, and neither requires withdrawals during the owner's lifetime. They differ on income limits, contribution limits, investment choices and what can move when you leave an employer. This guide is educational, not a recommendation.

Published and last refreshed October 29, 2026. As of that date, the figures below are the 2026 limits published by the IRS, and the rules come from the IRS pages listed in the sources. Most explainers on this topic are written for people early in their careers. This one is written for Western New York households within about ten years of retirement whose savings sit mostly in pre-tax 401(k) accounts, where a job change or retirement often forces a decision about what to do with the plan. Individual circumstances vary, and nothing here is tax advice or a recommendation to choose either account.

Roth IRA vs. Roth 401(k) at a Glance

The IRS describes a designated Roth account as a separate account inside a 401(k), 403(b) or governmental 457(b) plan, and only plans that add the feature offer it.[3] A Roth IRA is an individual account that is not tied to a plan.[4][6] Here is how the two compare, using 2026 figures where the IRS publishes them.

Feature	Roth 401(k) (designated Roth account)	Roth IRA
Who can contribute	A participant in a plan that offers the Roth feature. A plan is not required to offer it.[3]	Anyone with earned income, subject to the income limits below.[4]
Income limit to contribute	None. There are no income limits for designated Roth contributions.[3]	2026 modified AGI phase-out: single or head of household $153,000 to $168,000; married filing jointly $242,000 to $252,000; married filing separately $0 to $10,000.[1]
2026 contribution limit	$24,500 across traditional and Roth deferrals combined.[1][3] Plans that allow catch-up contributions may permit $8,000 more at age 50 or older, or $11,250 more at ages 60 to 63.[1]	$7,500 across all of your traditional and Roth IRAs combined, plus $1,100 at age 50 or older.[1][6]
Lifetime required distributions	None for the owner while alive. Beneficiaries are subject to RMD rules.[5]	None for the original owner while alive. Beneficiaries are subject to RMD rules.[5]
Withdrawals	Only when the plan allows. A nonqualified withdrawal is split pro rata between contributions and earnings.[4]	Any time. A nonqualified withdrawal comes from contributions first, then earnings.[4]
Loans	Only if the plan allows.[4]	Not allowed.[4]
Investment choices	Those the plan offers.[4]	Many, as long as not prohibited.[4]
Five-year clock	Separate for each Roth account, starting January 1 of the year of the first contribution to that account.[4]	Starts January 1 of the year of the first contribution to any Roth IRA.[4]

Limitations to keep in view:

• No income limit on a Roth 401(k) does not mean no limit at all. The annual deferral limit is shared with any traditional 401(k) deferrals, and the plan may set tighter rules.
• A Roth IRA gives more flexibility on investments and withdrawals, but it can be closed to you by income, and the lower contribution limit means it rarely changes a large balance quickly.
• Qualified withdrawals from either account are tax-free only if the five-year period and an age, death or disability condition are both met.[3] Future tax treatment is set by law and could change.

Two notes on the sources. The IRS "ten differences" chart still lists required distributions for designated Roth accounts, which was changed for tax years beginning after December 31, 2023, so this guide relies on the IRS required minimum distribution pages for that row.[4][5] The chart's dollar figures are also for earlier years and are not used here.

What About Traditional IRAs and Traditional 401(k)s?

People searching "traditional IRA vs Roth IRA vs 401(k)" are usually comparing three or four accounts at once. The short version is below, and our traditional vs. Roth 401(k) guide covers the 401(k) choice in more depth.

Feature	Traditional (pre-tax) 401(k)	Traditional IRA	Roth 401(k) or Roth IRA
Contributions	Made with before-tax dollars.[3]	May be deductible, depending on income and workplace plan coverage.[1]	Made with after-tax dollars. Roth IRA contributions cannot be deducted.[3][6]
Withdrawals	Generally included in taxable income.[5]	Generally included in taxable income, except amounts already taxed.[5]	Qualified distributions are generally not included in gross income.[3]
Owner RMDs	Yes, generally from age 73 or 75 depending on birth year. A current employer's plan may allow a delay until retirement.[5][10]	Yes, on the same age schedule.[5][10]	None during the owner's lifetime.[5]
2026 income rules	None to participate.[3]	The deduction phases out for a contributor covered at work between $81,000 and $91,000 (single) and $129,000 and $149,000 (married filing jointly).[1]	See the Roth IRA row above.

Limitation: A deduction or a tax-free withdrawal is only one side of the trade. A deduction now means income later, and tax-free withdrawals later mean tax now. Which side matters more depends on rates and income at different points in your life, and no one can know future rates in advance.

What Changes When You Leave an Employer?

Leaving an employer, by retiring or changing jobs, is the point where the two accounts usually meet. A Roth 401(k) balance can generally be left in the plan if the plan allows it, moved to a new employer's plan if that plan accepts rollovers, rolled to a Roth IRA, or paid out to you. The IRS says a plan is not required to accept rollover contributions, and that your plan administrator must explain your options in writing.[7]

• Rolling a Roth 401(k) to a Roth IRA. The IRS says you can roll a distribution from a designated Roth account into a Roth IRA.[3] Limitation: You generally lose plan features such as loans, and you take on the job of choosing and monitoring investments yourself.
• Moving the money by direct rollover. A direct rollover sends the money from the plan to the new account without paying you. A plan distribution paid to you is subject to mandatory 20% withholding, even if you intend to roll it over later, and you would need other funds to roll over the full amount within 60 days.[7] Limitation: A direct rollover takes coordination between two institutions, and the plan sets its own forms and timing.
• The five-year clock does not always travel with the money. When you roll a designated Roth account into a Roth IRA, the time the money spent in the plan does not count toward the Roth IRA's five-year period. If you had contributed to any Roth IRA in an earlier year, the Roth IRA's period is measured from that earlier contribution.[3] When one designated Roth account is rolled directly into another, the earlier start date applies.[4] Limitation: The date of a household's first Roth IRA contribution can therefore matter, and the rules are easy to misapply, so it is worth confirming with your tax professional before you move money.
• Pre-tax and Roth money are tracked separately. The IRS says an employer must keep designated Roth contributions completely separate from pre-tax contributions.[3] A rollover of the pre-tax part to a traditional IRA is generally not taxed until withdrawn, while a rollover of the pre-tax part to a Roth IRA is generally taxable in the year it happens.[2] Our Roth conversion pros and cons guide covers that decision.
• Required withdrawals can start earlier on money you roll to an IRA. The IRS says a plan may allow you to delay required minimum distributions from your current employer's plan until you retire, while IRA owners generally begin at the applicable age whether or not they are still working.[5] Limitation: Roth money has no lifetime RMDs in either place, but pre-tax money moved to an IRA loses that possible delay. Our RMD and Roth conversion explainer explains how required withdrawals and conversions interact, including that an RMD itself cannot be converted.

Trade-Offs and Limits to Weigh

Each feature below is paired with its limit, so you can see both sides.

• No lifetime RMDs on Roth money. Roth IRA owners and, since 2024, Roth 401(k) owners are not required to take withdrawals while alive.[5] Limit: Pre-tax accounts still carry RMDs, and a large pre-tax balance may raise taxable income in your seventies even if you hold Roth money too.
• Roth 401(k) has no income limit. Limit: For participants in plans with Roth features whose prior-year wages with the plan sponsor exceeded $150,000, catch-up contributions beginning in 2026 must be made on a Roth basis, so part of the choice may be set by rules rather than preference.[11]
• A Roth IRA is flexible. It offers broad investment choices and no required starting date for withdrawals.[4][5] Limit: Contributions are capped well below the 401(k) limit, direct contributions are phased out at higher incomes, and the five-year clock starts with the first Roth IRA contribution.[1][4]
• Employer matching. Employers can match designated Roth contributions. The IRS FAQ says those matches have been allocated to a pre-tax account.[3] Since SECURE 2.0, a plan may let employees treat vested matching or nonelective contributions as Roth, but a plan is not required to.[9] Limit: Roth treatment of an employer contribution is generally taxable in the year it is allocated, and plans vary, so ask your plan administrator.
• Doing both. The IRS says you can contribute to a designated Roth account and a Roth IRA in the same year, though income limits apply to the Roth IRA.[3] Limit: The two limits are separate, but both draw on the same household cash flow, and Roth contributions reduce take-home pay more than traditional contributions of the same size.

Qualified Roth withdrawals are not included in gross income, which may keep reported income lower in a year when you draw from them. Income can affect Medicare premiums, which are set by law and adjusted over time, so timing choices in the final working years are worth reviewing with your tax professional.[3]

Common Questions

Is a Roth 401(k) better than an after-tax 401(k)? They are different. Designated Roth contributions follow Roth rules, so qualified distributions, including earnings, are not included in gross income.[3] Contributions to an after-tax (non-Roth) account have already been taxed, but their earnings are generally treated as pre-tax amounts and may be taxable when distributed.[8] The IRS also says a partial distribution from a plan holding both pre-tax and after-tax money generally includes a share of each.[8] Which fits depends on what your plan offers and how it tracks the money, so confirm with your plan administrator.

Can my company match my Roth IRA contributions? Generally, no. An employer match is described by the IRS as a feature of the employer's plan, such as matching contributions on designated Roth 401(k) deferrals.[3] A Roth IRA you open yourself is an individual account.[6] If your employer offers a match, it is typically tied to the workplace plan, so check with your plan administrator.

Can I contribute to both a Roth 401(k) and a Roth IRA? Yes, if you meet the requirements for each, though the Roth IRA has income limits and a lower annual limit.[1][3]

Do I have to take required minimum distributions from a Roth IRA or Roth 401(k)? Not while the original owner is alive. For 2024 and later years, the IRS says withdrawals are not required from designated Roth accounts either. Beneficiaries of both are subject to RMD rules.[5]

Is there an income limit for a Roth 401(k)? No. The IRS says there are no income limits for designated Roth contributions, unlike the income limits that apply to Roth IRA contributions.[3]

Can I roll a Roth 401(k) into a Roth IRA when I retire? The IRS says yes, but the five-year clock may not carry over, as described above.[3]

Questions to Bring to a Planning Conversation

• Does my plan offer a Roth option, Roth catch-up contributions or a Roth employer match?
• If I leave this employer, what does my plan allow: leaving the money, a rollover, or a payout?
• Do I already have a Roth IRA, and when was the first contribution to it?
• How much of my savings is pre-tax, and how would required withdrawals at my applicable age fit with the rest of my income?
• Could a rollover, a conversion or a contribution change affect my income in the two years before I enroll in Medicare?
• What should I confirm with my plan administrator and my tax professional before I move any money?

Start With a Conversation

The firm's tax planning service looks at contributions, rollovers and withdrawals in one picture, and the who-i-help page describes the households it works with. You can also review how the firm charges for advice. If you would like to talk through your situation, start with a conversation. It is a 30-minute introductory call, and nothing in this article is a recommendation to choose a Roth IRA, a Roth 401(k) or any other account.

Sources

All sources accessed October 29, 2026.

1. IRS, 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IR-2025-111, November 13, 2025), 2026 deferral, catch-up and IRA limits, Roth IRA phase-out ranges and traditional IRA deduction phase-outs; see also IRS Notice 2025-67.
2. IRS, Topic no. 413, Rollovers from retirement plans, on rollovers being nontaxable except when moved to a Roth account from another type of plan or account.
3. IRS, Retirement plans FAQs on designated Roth accounts, on eligibility, income limits, employer match, qualified distributions, the five-year period, rollovers and combining with a Roth IRA. The dollar limits in these FAQs are for earlier years and are not relied on here.
4. IRS, Ten differences between a Roth IRA and a designated Roth account, on participation, withdrawals, loans, investment choices, nonqualified distributions and the five-year holding period. Its dollar figures and its required distribution row predate 2026 and 2024 changes and are not relied on here.
5. IRS, Retirement topics: Required minimum distributions (RMDs), on Roth IRAs and designated Roth accounts, taxation of withdrawals and delaying plan RMDs until retirement.
6. IRS, Roth IRAs, on nondeductible contributions and the combined limit for traditional and Roth IRAs.
7. IRS, Rollovers of retirement plan and IRA distributions, on direct rollovers, 20% withholding, the 60-day period and plan rollover acceptance.
8. IRS, Rollovers of after-tax contributions in retirement plans, on pre-tax and after-tax amounts in a plan distribution.
9. IRS, Internal Revenue Bulletin 2024-02, Notice 2024-2, Section L, on optional Roth treatment of employer matching and nonelective contributions under SECURE 2.0 section 604.
10. IRS, Internal Revenue Bulletin 2024-33, T.D. 10001 (final required minimum distribution regulations), on applicable RMD ages by birth year.
11. IRS, Retirement topics: Catch-up contributions and IRS Notice 2025-67, on the 2026 Roth catch-up wage threshold of $150,000.