Key Differences Between Roth IRAs and Roth 401(k)s That Affect Your Retirement Savings

Roth IRAs vs. Roth 401(k)s: Key Differences

Understanding the unique characteristics of Roth IRAs and Roth 401(k)s is crucial for maximizing your retirement savings. Both accounts offer tax advantages, but they differ in contribution limits, investment options, and employer matches.

1. Who can contribute

• Important: Any eligible individual can contribute to a Roth 401(k) if offered by their employer.
• Key Insight: Roth IRAs have income limits, but backdoor Roth IRAs provide an alternative for high earners.

2. Contribution limits

• Crucial: Roth 401(k)s allow higher contributions compared to Roth IRAs.
• Essential: Consider maximizing your Roth IRA before utilizing a Roth 401(k) as a supplementary option.

3. Investment options

• Significant: Roth IRAs offer more investment freedom than Roth 401(k)s.
• Key Point: Evaluate investment choices to align with your financial goals and risk tolerance.

Learn more about the remaining differences and choose the best retirement savings strategy for your financial future.