Comparing 401Ks & Roth IRAs
Retirement savings are important to everyone, but choosing the correct investment choice can be difficult. 401(k)s and Roth IRAs are two investing choices for retirement savings. Both choices have positive and negative aspects, but doing nothing is not an option. Research and choose the correct retirement account for yourself today.
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401(k) Advantages
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401(k) accounts have advantages such as tax-deferred contributions and optional matching funds from employers. Some employers match funds that employees put into company 401(k) plans to encourage saving.
401(k) Disadvantages
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A disadvantage of a 401(k) account is the lack of flexibility in choosing investments. Investing choices are regulated by the 401(k) manager.
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Roth IRA Advantages
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Roth IRAs are excellent investments, because they offer flexibility, tax-free withdrawals and ever-increasing contribution limits.
Roth IRA Disadvantages
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Roth IRAs may be less useful than other accounts, because they are not tax-deferred. This means that the contributions are still counted as taxable income.
Expert Insight
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Financial adviser Dave Ramsey advocates using both accounts. He says to use the 401(k) if there is an employer match and to use a Roth IRA for any amount above the matching contribution limit.
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Resources
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