401(k) vs. Roth IRA: The Basics You Need to Know to Start Saving for Retirement

In theory, retirement has always been that sweet, sweet carrot dangling ahead of us through the seemingly endless slog of our working years. You know: sleeping in, casual gambling, all tracksuits all the time, and telling everyone younger than you what's what because you've seen some things.

In reality, those sunset years are harder to bring to fruition than most of us realize. The future of Social Security benefits is genuinely uncertain: the Social Security trust fund is now projected to be exhausted by late 2032, triggering an automatic 22% benefit cut unless Congress acts. That is six years away. Getting to kick your feet up during your golden years is less of a sure thing than it used to be.

At Girlboss, we believe that financial knowledge is power, and retirement savings is one of the places women are most likely to fall behind. The reasons are real and complicated: more debt, higher costs of living than previous generations, and the persistent gender pay gap that means less to put away in the first place.

It can also feel genuinely complicated if you are not familiar with investing, especially if you are a freelancer or your employer is not handling it for you.

Still, it is extremely important to start. Below, read up on the basics of the two options most viable for most people, the 401(k) and the Roth IRA, with all the current 2026 numbers.

The 411 on 401(k)s

A 401(k) is a retirement plan sponsored by your employer. They will withhold a portion of your paycheck every month to invest in things like stocks, bonds, and money market investments. The key benefit: your contribution is factored in before taxes are taken out of your paycheck.

Here is what that means in practice with round numbers. Say your gross pay is $2,000 each month. If you elect to set aside 10% for your 401(k), that $200 comes out of your gross pay rather than your take-home pay. The money grows tax-deferred, meaning you do not pay taxes on it now. When you reach age 59 and a half and start withdrawing, it gets taxed as regular income. The party has just been postponed.

The other major potential benefit: employers often match your contribution up to a certain percentage, generally between 3 and 6 percent. That is free money. Best practice dictates that you contribute at least as much as your employer is willing to match.

Shindy Chen, personal finance expert and bestselling author of Credit Score Hacks, emphasizes that if your employer matches, you should absolutely take it. "Alas," she warns, "there are caveats. Check out how long you must work at said company before the matched money is yours to keep.

This is literally 'putting in your time,' a concept known as 'vesting,' and you'll want to check your company's vesting schedules. If your company doesn't offer immediate vesting when you begin contributing, think about whether you see yourself working there for the next three or six years, or whatever the schedule requires."

Chen also cautions that 401(k) programs are not created equal. "My beef with most 401(k) programs today is that they're loaded with all kinds of fees and middlemen. They've grown into this inflated sales industry, and are limited to a small menu of investments which aren't tailored to a person's individual path in life." Ahead of investing, she recommends ensuring the program meets basic fiduciary standards.

Roth IRA: Your Low-Key Retirement Bestie

Pay attention to this one, freelancers, and anyone else whose employer does not offer a 401(k). A Roth IRA is a retirement account set up directly between you and an investment firm.

While a Roth IRA might not seem as immediately appealing as a 401(k) — there is no employer on the other side matching your contributions, and you contribute from your take-home pay rather than your pre-tax paycheck — the Roth IRA has a very significant benefit: because you have already paid taxes on the money you put in, you do not pay taxes when you start withdrawing it at age 59 and a half. The returns on your investment go straight into your pocket.

There are also fewer restrictions on how much you distribute to yourself and when. 401(k)s and other retirement plans have "required minimum distributions," meaning you have to take out a certain amount each year even if you do not need it, and that money is taxable. Roth IRAs do not have that requirement.

Chen puts it plainly: "Wouldn't you rather have that certainty of always knowing what money you can take out? Because with Roths, you can always take out 100 percent of your original contribution without penalties."

If you earn above the income limit, you may still have options. A "backdoor Roth" strategy allows high earners to contribute to a traditional IRA and then convert it to a Roth. Talk to a fee-only financial advisor before attempting this, as there are tax implications to navigate.

So Which One Should You Choose?

If your employer offers a 401(k) match, start there and contribute at least enough to get the full match. That is genuinely free money you should not leave on the table. Then, if you have additional capacity to save, consider opening a Roth IRA alongside it — the two accounts have separate limits, and you can contribute to both in the same year.

If your employer does not offer a 401(k) or you are a freelancer, a Roth IRA is generally the best starting point: low barrier to entry, flexible contribution rules, and the long-term tax advantage of growing your money tax-free.

The most important thing in both cases is to start. The more you put in earlier, the better off you will be — that is how compound interest works. Even $25 or $50 a month is a better foundation than nothing. For more on building the financial habits that make retirement saving possible, our guide to financial literacy basics covers the full picture from emergency funds to investing.

And if you want to understand how the gender pay gap specifically affects women's retirement outcomes, this piece on workplace flexibility and the pay gap explains the systemic connection. Those velour tracksuits are not going to buy themselves.