This is one of the biggest misunderstandings when it comes to retirement accounts. Many people have a 401(k) through their employer and within it they can choose to make contributions either as traditional (pre-tax) or Roth (post-tax). Contributing to the Roth portion of your 401(k) is not the same as contributing to a Roth IRA. In reality, you’re contributing to a traditional 401(k) and a Roth 401(k). For 2025, most people can contribute up to $23,500 in total across these employer-sponsored 401(K) accounts.
Separately and in addition to these 401(k) accounts, you’re free to open a Roth IRA in your own personal brokerage account, as long as you meet the eligibility rules. For most filers, the contribution limit this year is $7,000. This is especially important because the Roth IRA is one of the most powerful investment accounts available, offering amazing tax advantages and long-term benefits. Knowing this distinction ensures you can take full advantage of both account types if possible.
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