Table of Contents
- 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