Description: A Roth IRA is a special individual retirement account (IRA) in which you pay taxes on contributions, and then all future withdrawals are tax-free.
There are many variables to consider when choosing a Roth IRA or a 401(k) retirement account. Each type of account provides an opportunity for savings to grow tax-free. Roth IRAs do not provide tax advantages when you make a deposit, but you can withdraw tax-free during retirement. The reverse is true for 401(k)s. These types of accounts involve contributing a portion of your paycheck into a 401(k) prior to income tax deductions. In terms of contribution limits, Roth IRAs are typically lower than 401(k)s. A
Lea Uradu, J.D. is a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, and Tax Writer.
Tara Anand / Investopedia