It’s completely possible to have both a Roth IRA and a 401(k) at the same time, and many savers use the pair as a two-engine system for retirement investing. The main guardrails are the separate annual contribution limits for IRAs and 401(k) plans, plus Roth IRA income limits that can reduce or block direct Roth IRA contributions at higher incomes.

The Short Answer and the Rules

A Roth IRA is an individual account you open on your own, while a 401(k) is tied to an employer plan, so owning one does not block participation in the other. The IRS also allows IRA contributions even when you participate in a workplace retirement plan, although traditional IRA tax deductions can be limited and Roth IRA contributions can be limited by income.

For contribution ceilings, the IRS lists the IRA contribution limit as $7,000 for 2025, or $8,000 if age 50 or older, across all traditional and Roth IRAs combined. For 2026, the IRS announced the 401(k) employee contribution limit rises to $24,500 and the IRA limit rises to $7,500, with higher catch-up limits for older savers.

Why Having Both Can Feel Powerful

The 401(k) often brings payroll convenience and, in many workplaces, an employer match that can add new money to your retirement savings without extra out-of-pocket cost. A Roth IRA often brings wider investment choice, plus tax-free qualified withdrawals when rules are met, which can add flexibility later in life.

Holding both accounts also gives more levers to pull as income changes, tax laws shift, or job moves happen. It also spreads tax treatment across account types if your 401(k) is pre-tax and your Roth IRA is after-tax, which can help manage future taxable income in retirement.

Contribution Limits and Eligibility Basics

Think of the accounts as two separate buckets with two separate caps. The IRA cap applies to the total you contribute across all your IRAs in that tax year, not per account, so splitting a contribution between a traditional IRA and Roth IRA still counts toward the same limit.

Roth IRA contributions can be reduced or phased out at higher modified adjusted gross income, and the IRS publishes updated ranges each year. For example, the IRS news release on 2026 adjustments lists the Roth IRA income phase-out range as $153,000 to $168,000 for singles and heads of household, and $242,000 to $252,000 for married filing jointly.

How to Invest Across Both accounts

Start by viewing both accounts as one unified household portfolio, then decide what percentage goes to stocks, bonds, and cash-like holdings based on time horizon and risk tolerance. After that, use each account for what it does well: the 401(k) for steady, automated paycheck investing and the Roth IRA for targeted holdings and long-term tax-free growth potential.

A simple working flow:

Put enough into the 401(k) to capture the full employer match if offered, because that match changes the math in your favor.
Fund the Roth IRA next if eligible, since it can add tax-free withdrawal potential when qualified distribution rules are met.
Then raise the 401(k) contribution rate until you reach your target savings rate or the annual limit.
Rebalance once or twice a year across both accounts combined, using the account with the lowest transaction friction for the adjustments.

How to Prioritize Investments

Prioritization is mostly about grabbing the best benefits first, then filling in the rest with consistent contributions. Many savers start with the 401(k) match because it is a direct, immediate boost to retirement dollars invested.

After the match, the decision often turns on flexibility and fees. A Roth IRA at a low-cost brokerage can offer broad index funds and clean fee transparency, while some employer plans have limited menus or higher expense ratios, though many plans are strong and inexpensive.

A practical priority ladder:

401(k) up to match (if available).
Roth IRA up to the annual IRA limit if eligible.
401(k) beyond match up to the annual employee limit.
If the 401(k) menu is excellent and low-cost, it can make sense to keep building there even while also contributing to a Roth IRA.

What to Invest Inside the Roth IRA vs the 401(k)

The Roth IRA is often treated as the “long runway” account because qualified withdrawals can be tax-free if the five-year holding rule is met and one of the qualifying conditions applies, including being age 59½ or older. That tax-free future can make growth-oriented assets feel at home there, especially for investors who plan to hold for decades.

The 401(k) can be ideal for broad, core holdings you want to buy every paycheck without thinking, like a total U.S. stock index fund plus an international index fund and a bond fund if those options exist in the plan. When the 401(k) also offers a good target-date fund, some savers use it as the portfolio backbone, then use the Roth IRA for “satellite” holdings such as small-cap tilt, REIT exposure, or extra international diversification.

Portfolio Allocation Strategy

Allocation starts with your timeline. A long horizon often supports a higher stock allocation, while a shorter horizon tends to call for a larger bond allocation to soften portfolio swings.

A descriptive way to build it:

Pick a core mix, such as stocks for long-term growth and bonds for stability, then keep it consistent through market cycles.
Use broad index funds when available, since they can cover large sections of the market with one holding.
Rebalance periodically so one asset class does not quietly take over the entire portfolio after a big run.

If you prefer simplicity, a target-date fund inside the 401(k) can provide an all-in-one mix that gradually gets more conservative over time, and your Roth IRA can mirror that mix or focus on a few complementary funds.

Which Funds Belong in Which Account

Asset location is the art of placing investments in the account type where they may behave best after taxes. For many households, that translates into putting the most growth-oriented assets into the Roth IRA, since qualified Roth withdrawals can be tax-free when the rules are met.

Meanwhile, the 401(k) often serves well for core stock index funds and bond funds because it is easy to fund through payroll and because many plans offer institutional share classes with competitive pricing. If your 401(k) offers only a few good choices, using it for the best low-cost “workhorse” fund and letting the Roth IRA carry the more specialized exposures can keep the overall portfolio tidy.

A common, readable mapping:

Roth IRA: Higher-growth stock funds, small-cap tilt, and other long-term holdings intended to stay invested for many years.
401(k): Core index funds, target-date funds, and bond funds if the menu is strong and the costs are low.

Watch-outs That Matter in Real Life

Overcontributing to an IRA can trigger an excess contribution tax, and the IRS describes a 6% tax per year for each year excess amounts remain in the IRA. If income rises above Roth IRA limits, direct Roth IRA contributions may be reduced or not allowed, based on the IRS phase-out ranges for the year.

Also, tax-free Roth IRA earnings withdrawals come with rules, including the five-year holding requirement and qualifying conditions like reaching age 59½. That makes the Roth IRA a great long-term tool, but not a casual short-term spending account for earnings.

Talk with Nevada Trust Company

Protecting wealth takes more than paperwork. It takes a fiduciary team that listens, plans, and stays accountable. Since 1995, Nevada Trust Company has served clients worldwide with trust, custody, escrow, retirement, and investment management services, built around a goal-based approach and a simple guiding belief: our client comes first.

Work with professionals who coordinate with leading tax strategists and estate planning counsel to support privacy, sound administration, and long-term family outcomes. Ready to discuss your next step? Call 702.696.0000 to speak with a Trust Officer today.