Roth IRA vs. Roth 401(k) – Choose The Best Plan For You

Joseph Meyer
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Table of Contents

  • Introduction
  • Roth IRA vs. 401(k)
  • How to Choose
  • How Much Should I Contribute?
  • Is There an Optimal Age to Open a Roth IRA?
  • Can I Open a Roth Later If I Miss the Annual Limit?

Roth IRA vs. Roth 401(k) – The Similarities

The Roth versions of these accounts do the same thing: they convert income that you put in the accounts into tax-free dollars.

You pay taxes on the money you convert to a Roth, but you don’t pay taxes on the income you earned to contribute to the account. Plus, if you accidentally withdraw the money in a traditional 401(k) before you’re 59 1/2, you have to pay a 10% penalty tax on top of the income tax you owe. With a Roth, that’s not an issue

(although there are exceptions for asset protection): you can withdraw your contributions at any time for any reason with no tax consequences.

Both Provide Tax-free Distributions in Retirement

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