What is the difference between a 401k and a Roth IRA?

+1 vote
asked Jun 13 in Other-Finance by Simon (410 points)
What is the difference between a 401k and a Roth IRA?

1 Answer

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answered Jun 13 by Jasire (7,740 points)
The main difference between a 401 K and a Roth IRA is when and how the taxes are paid on them.

With a 401 K you make contributions to the 401 K fund from Pre Tax dollars and you get a tax break upfront which can lower your current income tax bill.

With a Roth IRA it's more tax efficient though and the Roth IRA is tax free when it comes time to withdraw money from the Roth IRA.

With a Roth IRA the amount of money you can contribute is less than what you can put into a 401 K fund.

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