Workplace retirement accounts
A 401(k) is generally funded through payroll deferrals. Some employers add matching contributions based on the plan formula. If a match exists, understanding the formula can be one of the highest-value first steps at a new job.
Translate a match into dollars
Use Terra's 401(k) Employer Match Calculator to see the difference between the match percentage and the percentage of pay that is eligible for the match.
Calculate an employer match →Traditional vs. Roth is largely a tax-timing choice
Traditional pre-tax contributions can reduce taxable income today, while taxable withdrawals generally come later. Roth contributions use after-tax money today; qualified Roth withdrawals can generally be tax-free later. The better result depends heavily on tax assumptions and real-world rules.
IRAs have annual limits and compensation rules
For 2026, the combined annual contribution limit for Traditional and Roth IRAs is $7,500 for someone under age 50, or taxable compensation if lower. Roth eligibility and Traditional IRA deductibility can also depend on income and workplace-plan coverage. These limits change, so a course should teach the structure rather than encourage memorizing one year's number.
Can a teenager have an IRA?
A child can have an IRA if the child has taxable compensation. A parent or guardian may need to establish the account as a custodial IRA while the child is a minor. Money received as a gift is not itself earned compensation for IRA contribution purposes.
Taxable brokerage accounts
A brokerage account generally does not have the same annual contribution ceiling as an IRA, but dividends, interest, realized gains and fund distributions can create current taxes. For minors, custodial ownership rules may apply and vary by account type and state.
Other accounts you may encounter
Account menus get broader as life gets more complicated. A 529 plan is designed around education saving. A Health Savings Account (HSA) has special tax advantages for eligible people with qualifying health coverage. Custodial and other child-focused accounts can let an adult manage assets for a minor under account-specific rules. The important beginner lesson is not to memorize every account; it is to ask what the account is for, who is eligible, when the money can be used, what tax treatment applies, and who controls it.
Compare tax timing
Terra's Roth vs. Traditional calculator holds today's economic saving cost constant so you can see how the assumed future tax rate changes the modeled result.
Compare Roth vs. Traditional →A first-job 401(k) match can be a separate decision from Roth vs. Traditional.
Suppose a worker earns $50,000 and the employer matches 50% of employee contributions up to 6% of pay. Contributing 6% means the worker contributes $3,000 and the maximum employer match under that formula is $1,500. Whether the worker chooses a Traditional or Roth contribution — if the plan offers both — is a separate tax-timing question. The first step is understanding the actual plan formula and any vesting rules.
For 2026, the IRS says the employee elective-deferral limit for most 401(k) plans is $24,500, while the combined Traditional/Roth IRA contribution limit for someone under 50 is $7,500 or taxable compensation if lower. Limits and eligibility change over time, so Terra links the current IRS source rather than treating a number as permanent.
Common mistake
Choosing an investment before understanding the account, or choosing an account before checking eligibility and employer-plan rules. The tax container and the investment inside it answer different questions.
What could change the answer?
Employer match and vesting rules, current and expected future tax rates, earned compensation, Roth income eligibility, access to an HSA, plan investment choices and when the money may be needed.
Quick check
Which statement is correct?
Primary references
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