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3 key differences between a Roth 401(k) and a Roth IRA


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Roth accounts are after-tax accounts with unique benefits for retirement savers.

Investing in Roth IRAs is tax-free. Withdrawals are not subject to taxes during retirement. However, there are important differences in Roth savings made in a retirement plan and an individual account.

These are the most important.



Not everyone can save in a Roth IRA. Investors are ineligible if their annual income exceeds a certain level.

Roth 401 (k) plans, on the other side, don’t have income caps. However, some workers might not be able to choose a Roth401(k).

Single taxpayers can contribute up to $125,000 to a Roth IRA in 2021 if they have a lower income than $125,000. If their income exceeds $140,000, they can’t contribute.

A joint tax return is filed by married couples. They can contribute up to $198,000 but not more than $228,000 for married couples.

Workers can transfer Roth 401k savings from their current jobs to a Roth IRA if they retire or change jobs.

Required minimum distributions

Roth IRAs don’t carry annual required minimum distributions for their owners. Therefore, the account holders don’t need money to withdraw during their lives. Their heirs will, however.

The Roth 401k account requires distributions to begin at age 72. This is similar to traditional pre-tax savings accounts. Unlike withdrawals from pre-tax accounts, Roth distributions after age 59½ are tax-free.