Analyzing the Advantages and Disadvantages of Roth IRAs and Roth 401(k)s

Two ways a Roth IRA is better than a Roth 401(k)

Here are a few advantages Roth IRAs offer over Roth 401(k)s:

• More flexible investment options: Roth IRAs provide freedom in investment choices, including individual stocks and bonds, compared to limited options in Roth 401(k)s.
• Tax-free withdrawals of contributions: Roth IRAs allow penalty-free withdrawals of contributions, offering more liquidity than Roth 401(k)s.

Three reasons a Roth IRA isn't better than a Roth 401(k)

Consider the drawbacks of Roth IRAs:

• Low contribution limits: Roth IRA contributions are capped at a lower level than 401(k)s for both under 50 and over 50 age groups.
• Income limits: High earners face income restrictions in contributing directly to Roth IRAs, unlike Roth 401(k)s.
• No employer match: Roth 401(k)s offer the potential for an employer match, providing a significant benefit absent in Roth IRAs.

Decide on the best account for your retirement savings based on your financial situation and goals.