Does your retirement plan build tax-free wealth efficiently? Are you using a Roth IRA, Roth 401k, or Roth Conversion to add to your tax-free bucket? You can schedule an appointment with one of our Retirement Experts to look at your situation and help you plan for your future. Call us at (920) 544-0576 or go to
What is the best way to add money to your tax-free bucket?
✅ Should you contribute to a Roth IRA?
✅ Should you contribute to a Roth 401k?
✅ Or should you perform a Roth Conversion?
Even though each of these ends up with more dollars in Roth Accounts but what is the best Roth account and best way to add to these important retirement accounts?
A Roth IRA is quite different from a Roth 401k.
Roth IRAs are not subject to RMDs. They have a larger universe of investment options to choose from. And in certain ways, they have more accessibility, specifically before age 59.5.
Roth 401ks have a completely different set of benefits. Roth 401ks are afforded higher contribution limits with no income limit. They also can provide a match depending on your employer. They have creditor protections not afforded to Roth IRAs and they also have the ability to use the rule of 55!
So which is the best Roth account to contribute to?
Watch this video as we discuss the benefits and drawbacks between each account and also talk about whether a Roth contribution vs. a Roth Conversion makes more sense in order to transfer more wealth into these accounts.
#RothIRA #Roth401k #RothConversion #RetirementIncomePlanning
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Planning for your retirement is a critical decision that requires proper consideration. With various types of retirement plans available in the market, it is essential to weigh your options and choose the best plan that suits your financial goals. Two of the most popular retirement plans in the United States are the Roth IRA and Roth 401(k).
Roth IRA and Roth 401(k), both are retirement investment accounts that provide tax-free growth on the money you contribute. However, they differ based on their features and eligibility criteria. In this article, we will compare Roth IRA vs. Roth 401(k) to find which plan is best for you.
Eligibility criteria
A Roth IRA is available to anyone who has earned income and a maximum adjusted gross income of $140,000 (single filers) or $208,000 (married couples filing jointly). On the other hand, a Roth 401(k) is an employer-sponsored plan offered to employees who have access to this benefit.
Contribution limits
For the year 2021, the maximum contribution for a Roth IRA is $6,000 (if you’re under 50) and $7,000 (if you’re 50 or older). With a Roth 401(k), the contribution limit is higher at $19,500 (if you’re under 50), and $26,000 (if you’re 50 or older).
Employer Matching
One of the significant benefits of a Roth 401(k) is that the employer may match contributions, which can significantly increase an employee’s retirement savings. Unfortunately, there are no employer contributions with a Roth IRA.
Withdrawal rules
When it comes to the withdrawal rules, Roth IRA has some advantages over Roth 401(k). Roth IRA contributions and investment gains are accessible without penalties after five years of opening the account and reaching age 59 1/2. In contrast, with Roth 401(k), withdrawals are subject to the same tax and penalty rules as regular 401(k) plans.
Rollovers
Roth IRA provides flexibility in shifting the account balance into another qualified retirement plan. Additionally, you can consolidate multiple Roth IRA accounts to a single account. However, Roth 401(k) does not allow you to roll over funds to another qualified plan.
Fees
Both the Roth IRA and Roth 401(k) have fees, including administrative fees and investment expenses. Usually, Roth IRA fees are lower than those for Roth 401(k) plans. In general, fees play a significant role in the total amount of retirement savings, so it’s essential to compare both costs and choose the best option for you.
Conclusion
Roth IRA and Roth 401(k) are both excellent choices to boost your retirement savings. However, the best option depends on your individual needs, financial circumstances, and retirement goals. If you are eligible for both, you can choose to fund them simultaneously or alternate contributions between the two. Overall, it’s essential to get professional advice from a financial advisor and understand your options to choose the right investment plan to secure your retirement.
Any plans for Roth 401K vs Traditional 401K?
Can you rollover roth 401k to roth IRA in partial amounts?
Agreed that the Roth 401(k) is an awesome new addition, but I don't feel comfortable putting ALL contributions in the Roth, it is not always better. I think for higher income earners, deferring the taxes could be a great benefit
You talk fast. I think slowly.
Does a Roth conversion go against your income? In other words, if we do a large conversion and puts us above 214k, can we still contribute to Roth IRA? Don’t want to be in the wrong. Thanks
I have both and make max contributions to both. I wish I would've started using the Roth 401k earlier instead of the Traditional 401k. I use the backdoor method to contribute to the Roth IRA but I heard that Congress is probably going to do away with that this year. Unfortunately, I cannot do Roth Conversions until after I leave my company which won't be for another 4 years.
Great information as always! How does the 5 year clock and what's considered "contributions" work with a Roth 401k to Roth IRA rollover? Say you have money in a Roth 401k and retire prior to age 59.5, and you roll it over into a Roth IRA. Does the total amount get counted as "contribution" at that point and the 5 year clock starts then? Or do they actually look at contribution vs earnings in the Roth 401k to determine what's allowable to withdraw without penalty from the Roth IRA prior to age 59.5?
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I am 45 years old with very little set aside for retirement at this point plus social security. I have always been curious about the stock market and have witnessed some people who played the game right and retired early because they used the stock market. When I ask them, most said that they invested very little to start with, but their portfolio grew. I do have a significant amount of capital that is required to start up but I have no idea what strategies and direction I need to approach to help me make decent returnsRead more
As usual insightful and great information! Thank you.
Folks, you are doing such a great service by providing this information. Well well done. This work matters.
My company let me rollover the Roth 401K to a ROTH IRA, or vice versa rollover from a ROTH IRA into the ROTH 401K. Is the tax different between a "normal" ROTH and a rollover ROTH?
Your video saved me! Wow, I did not understand the 5 year rule on Roth 401 k's. I have had a personal Roth for about 15 years now and thought it's 5 year rule covered me completely. I opened a Roth 457 with my employer late last year (60 years old at the time) with $27,000 a year going into it. I am 61 now and plan to retire at 65. I started Roth conversions from my traditional 457. I had planned to convert nearly all of it, but I need to live on the distributions until I take Social Security at FRA or 70. Undecided yet. Now I need to alter my plans to work around the 5 year rule. At least I now have the time to figure it out. Thank you for this timely video!
Thanks for the response is there anyway that I can get a 401(k) Roth option without having an employer sponsored plan or could I get a part-time job with a 401(k) Roth option and contribute money made outside of work into that plan just curious to hit the maximum 26,000
Excellent video? My new job
Has 401k without Roth. My understanding I could contribute 26,000 of that but because they don’t have it I have to go on the outside and get a Roth IRA and I can only contribute 7000 is there any way around this