Video · Brian Kim
Roth IRA vs 401K - How to Retire Faster
Brian walks through the Roth IRA vs. 401(k) tax-timing trade-off and the contribution order most people should follow — employer match first, then Roth, then back to the 401(k).
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Published on YouTube December 21, 2022 · 10:34 · Text on this page updated · About 5 min read
Key points from the video
- A 401(k) is offered through your job and paid from your paycheck. Pros: a tax deduction now, employer matching and a much higher contribution limit. Cons: withdrawals are taxed, some plans have high fees, investment choices are limited, early withdrawals are penalized and you must take required minimum distributions.
- A Roth IRA is opened on your own. Pros: tax-free growth and withdrawals in retirement, more investment choices, usually lower fees, no required withdrawals, and you can take out your contributions (not earnings) without tax or penalty.
- Roth IRA cons: no tax deduction, a much lower contribution limit, and an income limit (with the backdoor Roth as a workaround).
- Which is better depends on you: the 401(k) if you want to save aggressively or want the deduction now, the Roth IRA if you prefer tax-free money later, or split between both. Either way, always take the full employer match; it is free money.
- Many employers also offer a Roth 401(k): no deduction now, tax-free withdrawals later, the higher 401(k) limit, and no income limit.
Summarized from Brian's own words in the video.
What's changed since this video
Video published December 21, 2022. Checked against current sources on October 13, 2026. These updates are from the ClearValue Lending Team, not Brian.
- Contribution limits Changed
In the video: 2023: $22,500 for a 401(k) and $6,500 for a Roth IRA.
Now: 2026: $24,500 for a 401(k) and $7,500 for an IRA. Catch-up contributions add $8,000 (age 50+) or $11,250 (ages 60 to 63) to a 401(k), and $1,100 to an IRA.
Source: IRS news release IR-2025-111 (2026 retirement limits) · as of
- Roth IRA income limit Changed
In the video: 2023: $153,000 single, $228,000 married.
Now: 2026: the ability to contribute phases out between $153,000 and $168,000 of modified AGI for single filers and heads of household, and between $242,000 and $252,000 for married couples filing jointly.
Source: IRS news release IR-2025-111 (2026 retirement limits) · as of
- Required minimum distributions Changed
In the video: 401(k) withdrawals are forced from age 72; Roth IRAs have none.
Now: The starting age is now 73. Roth IRAs still have no required withdrawals for the owner, and the IRS now says the same for designated Roth accounts in a 401(k) or 403(b).
Source: IRS — Retirement topics: Required minimum distributions · as of
- Catch-up contributions for high earners New since the video
In the video: Not covered.
Now: Starting in 2026, if your prior-year wages from the employer were over $150,000, any catch-up contributions to a plan with a Roth option must go in as Roth (after-tax).
Source: IRS — Retirement topics: Catch-up contributions · as of
Reader guide · ClearValue Lending Team
Roth IRA vs. 401(k) in 2026: a plain-English guide
Brian's video compares the two accounts most people use to save for retirement. This guide follows his video in order, updates every limit to 2026 and adds the rule changes since he made it. Every figure comes from irs.gov, checked on October 13, 2026.
Why the choice matters
Brian covers this in the video · watch from 0:00
Brian says many people find retirement accounts confusing, and the wrong choice can cost tens of thousands of dollars over a working life. The core question is when you pay tax: now, or later.
A traditional 401(k) gives you a tax break now and taxes the money when you take it out. A Roth account taxes the money now and lets it come out tax-free later. The rest of the differences are limits, fees, choices and rules.
| Account | Tax break | 2026 limit | Income limit to contribute |
|---|---|---|---|
| Traditional 401(k) | Deduction now; taxed later | $24,500 (plus catch-up) | None |
| Roth 401(k) | None now; tax-free later | Shares the $24,500 limit | None |
| Roth IRA | None now; tax-free later | $7,500 (plus $1,100 at 50+) | Phases out at $153,000–$168,000 single |
| Traditional IRA | Deduction may phase out if you have a workplace plan | Shares the $7,500 limit | No limit to contribute; the deduction phases out |
The 401(k): pros and cons
Brian covers this in the video · watch from 1:14
A 401(k) is a retirement plan offered through your employer. You choose how much of each paycheck goes in. Brian's list of pros:
- A tax deduction now. Traditional 401(k) contributions lower your taxable income for the year.
- Employer matching. Many employers add money when you contribute. Brian calls it free money.
- A much higher limit. $24,500 in 2026, against $7,500 for an IRA. Workers 50 and older can add $8,000 more, and workers aged 60 to 63 can add $11,250 instead.
And his cons:
Taxes on the way out. Money from a traditional 401(k) is taxed as income when you withdraw it.
Fees. Some plans are expensive. Brian notes plans must disclose their fees. Look at each fund's expense ratio, the yearly fee taken from the fund, because small differences add up over decades.
Limited choices. You pick from the plan's menu of funds. It is usually broad and diversified, which suits most people, but a specific investment may not be offered.
Early withdrawal penalty. Money taken out before age 59½ generally owes an extra 10% tax on top of income tax, unless an exception applies. One exception: leaving your job in or after the year you turn 55 lets you draw from that employer's plan without the 10%.
Required withdrawals. Brian says these start at 72. The age is now 73.
The Roth IRA: pros and cons
Brian covers this in the video · watch from 4:26
A Roth IRA is an account you open yourself, outside work. Brian's pros:
- Tax-free growth and withdrawals. Qualified withdrawals in retirement, including all the growth, are tax-free.
- More investment choices. It depends on the firm, but you are not limited to an employer's menu.
- Usually lower fees, because firms compete for your account.
- No required withdrawals while you are alive, so the money can keep growing tax-free.
- Access to contributions. You can take out what you put in at any time without tax or penalty. Earnings are different.
Brian's example: you put in $1,000 and it grows to $1,200. You can take out the $1,000 freely. The $200 of earnings may be taxed and penalized if you take it out early.
The IRS rule behind this: withdrawals come out of your contributions first, then earnings. Earnings are tax-free only in a qualified distribution, which needs the account to be at least five years old and you to be 59½ or older (or disabled, or using up to $10,000 for a first home).
Brian's cons: no deduction now, a lower limit ($7,500 in 2026), and an income limit. In 2026 the right to contribute phases out between $153,000 and $168,000 of modified AGI for single filers, and $242,000 to $252,000 for joint filers. He mentions the backdoor Roth IRA as a workaround for higher earners, which is beyond this guide.
How to choose
Brian covers this in the video · watch from 7:21
Brian says the answer depends on your situation and goals. His scenarios:
| If you… | Brian's suggestion |
|---|---|
| Want to save as much as possible | Use the 401(k) for its higher limit, and add a Roth IRA too. You can fund both. |
| Like the idea of tax-free money in retirement | Roth IRA (or a Roth 401(k)) |
| Are in a higher tax bracket and want the deduction now | Traditional 401(k) |
| Can't decide | Split your savings between both |
| Have an employer match | Always contribute enough to get the full match first |
Don't skip the match. Brian's example is a 50-cent match on every dollar. Put in $1,000 and your employer adds $500. That is an instant 50% return before any investment growth.
A common order many people use: first contribute enough to get the full match, then fund a Roth IRA if you qualify, then go back and add more to the 401(k). The right order depends on your fees, your plan's funds and your tax bracket.
Tax bracket now vs. later. A deduction now is worth more if your bracket is higher today than it will be in retirement. Roth money is worth more if your bracket will be the same or higher later.
The Roth 401(k)
Brian covers this in the video · watch from 9:23
Brian's last tip: many employers also offer a Roth 401(k). It works like a Roth IRA, with no deduction now and tax-free qualified withdrawals later. But it has the 401(k)'s higher limit and no income limit, so high earners can use it.
Two changes since the video make it more attractive:
- No required withdrawals. Under current IRS rules, designated Roth accounts in a 401(k) or 403(b) are not subject to required minimum distributions while the owner is alive.
- Roth catch-up for higher earners. Starting in 2026, if your prior-year wages from that employer were over $150,000, any catch-up contributions must go in as Roth.
You can split your 401(k) contributions between traditional and Roth in any proportion, as long as the total stays within the $24,500 limit.
Next steps
Educational information, not investment, tax or legal advice. ClearValue Lending is an education and comparison platform; it does not manage money or recommend specific investments. Check your own plan's rules and talk to a tax professional about your situation.
Questions viewers ask
What is the 401(k) contribution limit for 2026?
$24,500. Workers 50 and older can add an $8,000 catch-up, for $32,500 in total; workers aged 60 to 63 can add $11,250 instead of $8,000. Source: IRS news release IR-2025-111.
What is the Roth IRA contribution limit for 2026?
$7,500, plus a $1,100 catch-up if you are 50 or older. That limit is shared across all your traditional and Roth IRAs.
What are the Roth IRA income limits for 2026?
The right to contribute phases out between $153,000 and $168,000 of modified AGI for single filers and heads of household, and between $242,000 and $252,000 for married couples filing jointly.
Can I contribute to both a 401(k) and a Roth IRA?
Yes. They have separate limits. In 2026 you can put up to $24,500 in a 401(k) and up to $7,500 in IRAs, if your income allows Roth contributions.
Can I take money out of a Roth IRA early?
Your contributions, yes, at any time without tax or penalty. Earnings taken out before you are 59½ and before the account is five years old may be taxed and hit with a 10% additional tax, unless an exception applies.
When do required minimum distributions start?
Generally at age 73 for traditional IRAs and 401(k)s. Roth IRAs and Roth 401(k) accounts have no required withdrawals during the owner's lifetime.
What is the penalty for withdrawing from a 401(k) before 59½?
Generally a 10% additional tax on top of regular income tax, unless an exception applies. One exception: leaving that employer in or after the year you turn 55.
What is a Roth 401(k)?
A Roth option inside your workplace plan. You get no deduction now, but qualified withdrawals are tax-free. It shares the 401(k) limit and has no income limit.
Should I always take the employer match?
Brian says yes: it is free money. With a 50-cent match, $1,000 from you brings $500 from your employer before any growth.
Do high earners have to make Roth catch-up contributions?
Starting in 2026, yes in plans with a Roth option: if your prior-year wages from that employer were over $150,000, catch-up contributions must be made as Roth contributions.
Full transcript
From YouTube's auto-generated English captions, cleaned for punctuation and paragraphs. Brian's words are unchanged except for clear caption errors; text in [brackets] marks an editor's insertion or audio the captions did not catch.
Read the full transcript (1,786 words)
Editor's note: This video is from December 2022. The limits, income thresholds and the required-withdrawal age are as Brian stated them for 2023; the guide below gives the 2026 figures. The "59½" age and the $1,000 Roth example were mis-captioned and are corrected in the text.
Introduction watch from 0:00
In today's video we are comparing the Roth IRA versus 401(k). I want to start off with my legal disclaimer. My disclaimer is I am a certified public accountant, so I'm a CPA, and I have helped so many of my clients retire faster. So with that being said, let's review which account is better for you, a Roth IRA versus 401(k). So listen, if you're confused about which retirement account is better for you, I completely get it. That's how so many people feel, because I mean, this is confusing stuff, and I want to break it down for you nice and easy. I want to share my expertise with you.
And if you're going to watch this, please watch this until the very end, because that will help you save tens of thousands of dollars, if not hundreds of thousands of dollars, and it's going to help you retire faster and have more money at retirement. So if you want a better and faster retirement, then you came to the right place, and I just want to say that you're in for a treat, because I'm going to share my expertise with you, and this is the type of consultation that you would pay for with the CPA. So my mission is to spread financial education, and if you want to support my cause, please hit that like button and please consider subscribing. Thank you for the support. Now let's review which plan is best for you. First you need to
Understanding 401(k) plans watch from 1:14
understand the pros and cons of the 401(k) and Roth IRA. A 401(k) is a retirement plan that your company will offer you. It's up to you whether you want to put money into the 401(k) or not. If you want to put money into the 401(k), the money will be coming out of your paycheck, but you get to decide how much of your paycheck goes into your 401(k). Now let me tell you the pros and cons of a 401(k), and we're going to get started with the pros. The first one is a tax write off. When you put money into your 401(k), it lowers your taxable income, so it's a tax deduction.
Two, employer matching. Many companies will offer you a match. If you put money into a 401(k), your company will contribute a additional money into your account, so this is basically free money for you. Number three, bigger contribution limits. So there's a maximum amount of money that you're allowed to put into your 401(k) each year. That amount gets adjusted for inflation every year. In 2023 the limits is $22,500, but compare that to a Roth IRA, which is $6,500. So if you're looking to contribute more money to save for retirement, then this is definitely something that you'll keep in mind. So those are the good things about a 401(k), but let me tell you about the bad things as well.
So here are the cons of 401(k). The first one is taxes. So here's the thing: when you put money into a 401(k), you receive a tax deduction; however, when you take that money out, you're going to have to pay taxes on it. Number two, higher fees. Some 401(k) plans charge you high fees; however, the Department of Labor requires that 401(k) providers disclose all fees. Therefore, make sure that you pay attention to the fees and expense ratios, because over time these add up, and they can make a significant impact on your returns. Number three, limited investment options. So the 401(k) offers a limited amount of mutual funds or ETFs that you can choose from.
What you can invest in within the 401(k), it's generally going to be broad and diversified, which that's probably the safer option for most people. However, that does mean that if you're looking for a particular investment, it may not be an option within your 401(k). Number four, early withdrawal penalties. If you withdraw your money from your 401(k) before your retirement age, then you will get penalized. It's currently set at 59½ years old. So yes, there are some exceptions to this rule; however, in most instances you will be subject to a 10% early withdrawal penalty. Therefore early withdrawals will be taxed and penalized. Number five, required minimum distributions.
At the age of 72, you will be forced to withdraw a minimum amount of money from your 401(k) each year. The minimum amount is based on your life expectancy and your account balance. So that's the good and the bad of the 401(k).
Understanding Roth IRAs watch from 4:26
Now let me tell you about the Roth IRA. A Roth IRA is a retirement plan that you set up outside of your work. So let's go over the pros and cons, and we'll start with the pros. Number one, tax-free. The awesome thing about a Roth IRA is that any money that you make within the Roth IRA will be tax-free. Therefore, when you take your money out at retirement, it's all tax-free, the whole thing. Number two, more investment options. The Roth IRA will offer more investment options compared to a 401(k). It's ultimately going to depend on the financial institution that you go with. Number three, minimal fees.
Compared to a 401(k), the Roth IRA is known for having less fees. That's because financial institutions compete for your business. Therefore, you should be able to find very competitive fees on your Roth IRA. Number four, no required minimum distributions. You will not be forced to withdraw money from your Roth IRA regardless of your age, so this is going to allow you to experience more tax-free growth. Number five, no early withdrawal penalties. So I want to be very clear on this one: you can take out your contributions without paying any penalties or taxes, but this will not apply to your earnings. For example, let's say that you put $1,000 directly into your Roth IRA.
If it grows to $1,200 in total, then you can withdraw up to $1,000 penalty-free. If you take out the remaining $200 of earnings, the $200 would be subject to penalty. Now let me tell you about the cons of a Roth IRA. So the first one is that there's no tax deduction. You do not receive a tax write off for putting money into your Roth IRA. So that's the tradeoff: no taxes when you take your money out, but no tax deduction for putting your money in. Number two, a lower contribution limit. The maximum amount that you can put into your Roth IRA each year is smaller compared to a 401(k).
In 2023 the maximum amount that you can put into a Roth IRA is $6,500. For a 401(k), it's $22,500. Number three, income limitations. If you make too much money, then you are disqualified from putting money into your Roth IRA. The income threshold gets updated for inflation each year. In 2023, if you're single, it's $153,000. If you're married, it's a total combined income of $228,000. However, there's a workaround to bypass this. It's called the backdoor Roth IRA, but that's for a separate video, but just keep that in mind. So that's a description of the 401(k) and the Roth IRA.
Choosing the best account watch from 7:21
So which one is going to be better for you is going to depend on your situation and your objectives, but let's go over some very straightforward scenarios. So for example, if you're trying to fund your retirement accounts aggressively, then the 401(k) will allow you to contribute more money. However, just so you know, if you're trying to put a lot of money into your retirement accounts, you are allowed to contribute to both plans. So you can put money into the 401(k) and the Roth IRA if you want. So if that's your goal, to put away as much money as possible in a given year, then you can max out both the accounts.
So if you can afford to do it and you want to do it, then go for it. When choosing between the 401(k) versus Roth IRA, it may be a matter of preference. It may just boil down to that. So maybe you like the idea of having tax-free money in retirements. If that's your preference, then go with the Roth IRA. So maybe you're in a higher tax bracket and you want, you want the tax deduction right now for putting money into your retirement accounts. If that's the case, then go with the 401(k). If you're torn, like both sound good, both sound very, very attractive to you, and you can't make up your mind, then I would say that you have the option to split it up.
You can put a portion of your money into the 401(k) and some of your money into a Roth IRA, so you can take a balanced approach, and you could utilize both retirement accounts. But I'll tell you one thing, though, and this is so important: if your company offers you a match in your 401(k), then take advantage of it. That is free money. If your company offers you, let's just say, 50 cents on the dollar, that means that if you put $1,000 into your 401(k), then your company will put in an additional $500 into your 401(k) for you. So that is awesome, that is free money, and please take advantage of
Introduction to Roth 401(k) watch from 9:23
it. And the last thing that I want to tell you is that many companies will offer you a Roth 401(k). So we covered the Roth IRA, but I want to give you a heads up about the Roth 401(k). Some employers offer the Roth 401(k), and it has the same principles as the Roth IRA. With the Roth 401(k), when you put money into that account, you will not receive a tax deduction; however, when you take that money out and the earnings, that will all be tax-free. So there's going to be differences with the Roth 401(k), such as the contribution limit. So the contribution limit is going to be higher with the Roth 401(k) compared to the Roth IRA.
So the Roth 401(k), it's going to have the same contribution limit as the 401(k), which is much higher. Additionally, there is no income limitation like there is with the Roth IRA. Therefore, regardless of how much money you make, you can still contribute to a Roth 401(k). I hope that was helpful. If you'd like to check out our exclusive content, then please visit us on Patreon. I'll leave a link down below. Thank you so much for all the support. Please Subscribe, and I wish you a very nice day.
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