401(k) vs. Roth IRA: Which Retirement Account is Best for You?

You’ve probably heard the praises of the Roth IRA, which gets a lot of love for good reason: It offers tax-free growth, which means you’ll never pay taxes on the account’s investment earnings.

Roth IRAs are so lucrative, in fact, that it can be tempting to forgo other options, like your company’s 401(k), when planning for retirement.

But you can — and in most cases, should — contribute to both a 401(k) and a Roth IRA. You just need to prioritize those contributions wisely. Here’s how to do that:

Roth IRAs have contribution and eligibility limits

The IRS isn’t offering up the tax-favorability of the Roth IRA to just anyone — these accounts come with strict eligibility rules and contribution limits.

The contribution limit in 2015 and 2016 is $5,500 per year. Savers who are age 50 or older get an additional catch-up contribution of $1,000. (If you have both a Roth and a traditional IRA, note that it’s a combined limit — your contributions to both can only add up to $5,500.)

Also, for 2015, you cannot contribute that full amount to a Roth IRA if you are married filing jointly and your modified adjusted gross income exceeds $183,000; for single filers, that income limit is $116,000. In 2016, those limits will be adjusted upward slightly, to $184,000 for joint filers and $117,000 for singles. Incomes above those limits can contribute lesser amounts until eligibility ends completely.

If you’re not eligible for a Roth, consider combining your 401(k) with a traditional IRA.

A 401(k) with matching dollars comes first

Most people who have a 401(k) also receive matching dollars from their employer — 94% of plan sponsors offer a matching or profit-sharing contribution, according to a recent Deloitte report.

So if you have a 401(k), contributing enough to get that employer match is priority one. If you don’t do that, you’re walking away from free money.

Those dollars can add huge weight to your retirement account: Someone who earns $50,000 and contributes 6% annually to a 401(k) will have a balance of over $600,000 after 35 years, factoring in salary increases and a 7% return. Add in an employer match of 50% — relatively standard these days — and that balance jumps by more than $300,000.

Then start contributions to a Roth IRA

The employer match is what redeems most 401(k) plans, which tend to have high fees and limited investment options.

Because of those drawbacks, if your 401(k) doesn’t offer matching dollars — or if you’ve already contributed enough to grab them for the year — you should move your focus to a Roth IRA.

Unlike a 401(k), you’ll contribute after-tax dollars to a Roth, which means there is no immediate tax break on contributions. That’s easily offset by the tax-free growth of your investment earnings. You can pull money out of your Roth in retirement without owing a cent to the IRS.

A Roth also gives you a bit more access to your money. Both 401(k)s and IRAs should be used for retirement, and the money contributed should be considered long-term savings. That said, you’re allowed to pull your contributions out of a Roth at anytime.

The earnings on those contributions can be tapped, too, but only for limited qualified early distributions ; otherwise, earnings have to stay in the account until age 59 ½ if you want to avoid taxes and penalties.

A 401(k) makes it more difficult to get your money, though there are early withdrawal exceptions for that account, too, as well as loan options .

Want to keep saving? Go back to the 401(k)

Depending on your retirement needs , a 401(k) with a match and the smaller contribution limit of a Roth IRA may still not be enough to build a decent nest egg.

To continue saving for retirement once you’ve maxed out your Roth IRA for the year, restart contributions to your 401(k). It has a much higher annual contribution limit — $17,500 in 2015 and 2016, with catch-up contributions of $5,500 for those age 50 and older.

Although you’ll no longer get matching dollars, a 401(k) is still a tax-advantaged way to save for retirement.

Don’t have a Roth IRA? Here are NerdWallet’s top picks

Best Roth IRA Providers Overall

These providers stand out because of their low-cost and commission-free mutual funds and exchange-traded funds (ETFs), strong customer service and no account minimums.

In an ideal world, an IRA would have no minimum, a range of investment options, good customer service to help you sort through them, and low fees — both commissions and investment expense ratios. The accounts offered by E-Trade and TD Ameritrade check all of those boxes.

Scottrade and E-Trade are ideal for beginners: They both emphasize investor education, strong customer service and a network of physical branches where investors can meet with an advisor and even attend investing seminars. E-trade will appeal to people who want to dabble in ETFs; it offers more than 100 commission-free, whereas Scottrade has none.

A robo-advisor like Betterment and Wealthfront takes on the brunt of the work: These companies manage your IRA using automated investing technology combined with customized portfolio allocation based on your goals.

You’ll pay a small fee for the service, but it’s substantially lower than what a financial advisor would charge, and both companies invest in low-fee ETFs. Which is best for you? Here’s a direct comparison .

Best Roth IRA Providers for Frequent Traders

These options offer low commissions on stock trades, plus extensive research and tools.

Playing the market with your entire portfolio goes against common advice for the average investor . But if you want to dedicate a portion of your IRA to stock trading, you want to look at trading commissions, research and tools when comparing providers.

For the lowest stock trading costs, look to OptionsHouse and TradeKing. Both offer stock and ETF trades for $4.95, as well as tools to help you craft your trading strategy. OptionsHouse edges out TradeKing by charging no account fees; at TradeKing, you’ll pay a $50 annual fee if you don’t execute at least 12 trades a year or maintain a combined account balance of $2,500.

Best Roth IRA Providers for Fee-conscious Investors

You want to prioritize providers that offer low-cost mutual funds and ETFs.

If access to low-cost mutual funds and ETFs are your No. 1 concern, you should look to Fidelity, which offers a wide range of commission-free mutual funds and commission-free ETFs with low expense ratios. The downside? Fidelity requires a minimum $2,500 initial investment (or $200/month auto investments).

Vanguard gets an honorable mention for its Vanguard 500 Index Fund, which is free to purchase and carries an expense ratio of just 0.17%, which is 84% lower than its counterparts. But its minimum initial investment can be prohibitive: You can open an account with just $1,000, but you’ll need $3,000 to invest in most funds, including the Vanguard 500.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com . Twitter: @arioshea.

This article originally appeared on NerdWallet.