Roth IRA vs. 401(k): Which Should You Choose?
The Roth IRA and 401(k) are two of the most popular retirement accounts. Choosing which strategy is best for your circumstance can be a tough decision.
What are the differences?
The first significant difference between investing in a Roth IRA versus a 401(k) plan is how you go about making contributions.
Snatch the 401(k) Match
It’s also important to consider how employer matching contributions work within a 401(k) plan. Many firms have a matching policy; for example, 50% of the first 6% of contributions.
Early Withdrawal Rules
Here is a situation where a Roth IRA beats out the Roth 401(k): early withdrawals. Usually, pulling money out of your retirement comes with a penalty. That is not always the case with a Roth IRA since you can withdraw contributions at any time.
Annual Contribution Limit
A Roth IRA also has a lower annual contribution limit than a Roth 401(k). According to the IRS, the maximum IRA contribution for 2021 and 2022 is $6,000 ($7,000 for those age 50 or older).
Want to read more about Roth IRA and 401(K) and which should you choose?
Click here to read more!