Actionable advice for choosing and combining retirement accounts for a stronger, more tax-efficient future.
What is a 401(k) and When Should You Use It?
A 401(k) is an employer-sponsored retirement plan that allows you to save with either pre-tax (Traditional) or after-tax (Roth) dollars. It’s often the first and most powerful retirement vehicle for working professionals.
Use a 401(k) if:
- Your employer offers a match — contribute at least enough to get the full match. It’s free money.
- You want to save aggressively — annual limits are much higher than IRAs.
- You prefer automated savings through payroll deductions.
Consider Roth 401(k):
- If you’re young or expect higher income in retirement, Roth contributions can be powerful.
- You want tax-free withdrawals and can afford to pay taxes on your contributions now.
2025 Contribution Limits:
- $23,500 under age 50
- $31,000 for age 50+ (includes catch-up)
Quick Tip: Even if your plan has limited investment options or higher fees, the match and tax advantages often outweigh the drawbacks. Just be sure to review investment allocations annually.
What is an IRA and When Should You Use It?
An IRA is a personal retirement account you open independently of your employer. It gives you access to more investment options and control.
Use an IRA if:
- You’ve already maxed out your 401(k) and want to save more.
- You’re self-employed or not covered by a workplace plan.
- You want greater investment choice and control.
Choose a Traditional IRA if:
- You expect to be in a lower tax bracket in retirement.
- You’re not eligible for a Roth IRA due to income limits.
Choose a Roth IRA if:
- You want tax-free income in retirement.
- You’re eligible — income under $146,000 (single)
- or $230,000 (married) in 2025.
- You want to avoid RMDs (Required Minimum Distributions).
2025 Contribution Limits:
- $7,000 under age 50
- $8,000 for age 50+ (includes catch-up)
Quick Tip: Roth IRAs are especially powerful for younger savers or those planning on large taxable income in retirement. Plus, you can withdraw contributions tax-free at any time.
Traditional vs. Roth: Which Is Right for You?
If You… | Consider This |
Expect higher taxes in the future | Roth 401(k) or Roth IRA |
Expect lower taxes in retirement | Traditional 401(k) or IRA |
Want flexibility with RMDs | Roth IRA (no RMDs required) |
Want to lower taxes now | Traditional contributions |
Are saving for legacy goals | Roth IRA (tax-free to heirs) |
Quick Tip: Many people benefit from a mix of Traditional and Roth accounts to provide flexibility and tax control in retirement.
Should You Have Both a 401(k) and an IRA?
Yes — if your financial situation allows it, combining the two can maximize savings and flexibility.
Here’s what to do based on your situation:
Situation | Recommended Action |
You have an employer match | Max out the match in your 401(k) first |
You want tax-free retirement income | Contribute to a Roth IRA (if eligible) or Roth 401(k) |
You want more investment control | Open an IRA with a broader custodian |
You’re self-employed | Consider a Solo 401(k) + IRA combination |
You’re in a high tax bracket now | Use Traditional contributions to reduce the current tax burden |
You’re expecting low-income years soon | Plan Roth conversions during those years |
Quick Tip: You don’t have to pick one over the other. In fact, the best strategy often includes both.
How to Make Smart Retirement Account Choices
- Start with your employer plan:
- Contribute enough to get the full match.
- Use Roth 401(k) if you expect future tax rates to rise.
- Add an IRA if you’re eligible:
- Use a Roth IRA if under the income limit.
- Use a Traditional IRA if you want a deduction and qualify.
- Build tax diversification:
- Have both Roth and Traditional buckets.
- This gives you income flexibility later.
- Review annually:
- Income, tax brackets, and goals change. So should your strategy.
- Consider conversions:
- Strategic Roth conversions during low-income years can provide long-term tax savings.
Take Action: Tailor Your Plan to Your Goals
Retirement planning is not one-size-fits-all. Your career, income, tax picture, and lifestyle goals should drive how you save.
Whether you’re trying to lower taxes today, build tax-free income for tomorrow, or balance both, the right blend of accounts can make a lasting difference.
Schedule a complimentary review and let’s make sure your retirement plan is built to do more than just accumulate, it should adapt, protect, and serve your long-term vision.
Christopher G. Price, CFP®, RICP®, ChFC®, C(K)P®, CPFA® Financial Planner | Investment Advisor Representative
Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate. Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC.www.SIPC.org 1000 Corporate Drive, Floor 7 Fort Lauderdale, FL 33334 Telephone # (954) 938-8800
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