Mat and Mark discuss key points you need to know in order to decide what account types are best for you based on your personal situation and investment objectives. We’ll discuss the qualifications and requirements for each account type. Watch The Great Debate between tax attorneys and bestselling authors, Mat Sorensen & Mark J. Kohler on how to best grow your money tax-free.
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Leave your questions in the comment section below!
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Learn how to take control of your retirement –
Self-directed IRA Podcast –
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Blog & Articles –
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Leave your questions in the comment section below!…(read more)
LEARN MORE ABOUT: IRA Accounts
TRANSFER IRA TO GOLD: Gold IRA Account
TRANSFER IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
When it comes to planning for retirement, there are several options to consider, including ROTH IRA and ROTH 401K accounts. Both of these retirement savings accounts offer tax-free growth and tax-free withdrawals in retirement, but there are key differences between the two that individuals should be aware of before making a decision.
First, let’s define each account. A ROTH IRA is an individual retirement account that is funded with after-tax dollars, meaning that contributions are made with money that has already been taxed. On the other hand, a ROTH 401K is a retirement savings plan offered by an employer that combines elements of a traditional 401K and a ROTH IRA, allowing employees to contribute after-tax dollars just like a ROTH IRA, but with higher contribution limits and employer-matching contributions similar to a traditional 401K.
One of the main differences between the two accounts is contribution limits. For 2021, the maximum contribution for a ROTH IRA is $6,000 for individuals under the age of 50, while the maximum contribution for a ROTH 401K is $19,500 for individuals under the age of 50. This means that individuals can potentially save more for retirement in a ROTH 401K than in a ROTH IRA.
Another key difference is employer contributions. While ROTH IRAs do not allow for employer contributions, ROTH 401Ks may offer employer-matching contributions, which can significantly boost retirement savings. This means that individuals with a ROTH 401K may benefit from free money from their employer, increasing the overall value of their retirement savings.
Additionally, ROTH 401K accounts allow for loans and hardship withdrawals, which can be beneficial in certain situations. However, it’s important to note that these withdrawals may be subject to taxes and penalties, and can negatively impact long-term retirement savings.
Furthermore, ROTH IRAs offer more flexibility in terms of investment options, as individuals have the ability to invest in a wide range of assets, including stocks, bonds, mutual funds, and ETFs. On the other hand, ROTH 401Ks may have a limited selection of investment options, depending on the employer’s plan.
When it comes to eligibility, ROTH IRAs have income limits, meaning that individuals with higher incomes may not be able to contribute to a ROTH IRA. In contrast, ROTH 401Ks do not have income limits, allowing individuals with higher incomes to maximize their retirement savings.
In conclusion, both ROTH IRA and ROTH 401K accounts offer tax-free growth and tax-free withdrawals in retirement, but there are important differences to consider. Individuals should weigh factors such as contribution limits, employer contributions, investment options, eligibility, and flexibility before making a decision. Consulting with a financial advisor can also provide valuable guidance in selecting the right retirement savings account for individual needs and goals.
Mark, my IUL, with the index I'm using, is one part of my overall retirement strategy. Your use of the word "Better" is subjective at best. Among other reasons, I do value my IUL because it won't lose value during market downturns. The worst my contract allows for is a positive 1/4% rather than losing like the IRA's and 401Ks have with my friends and some family. True, theirs were not self directed, and that makes a big difference. However, they're not the kind of people who want to manage their retirements, rather simply enjoy retirement. When their retirements took huge hits, I did not, and that is "Better" for me to not lose money. Great job on everything else though Mark:)
should i split the 401k with 401k ira
Love you guys.