Roth IRA vs. 401(k): Which Retirement Account is Right for You?

It is worth considering how a Roth IRA stacks up vs a 401k when trying to decide on a retirement account. Here are a few things to consider about Roth IRAs and 401ks.

401k 

The 401k plan is a retirement account that is traditionally set up through a business. With this type of account, you are allowed to make contributions on a pretax basis out of your paycheck. Your employer can also choose to contribute to the account as they see fit. Employers receive a tax deduction when they contribute to their employees' accounts. Therefore, this can provide you with a valuable source of extra money for your retirement.

Roth IRA

The Roth IRA is another type of retirement account that is set up by an individual. One of the big differences with this type of account is in the way that the taxes are handled. You fund the Roth IRA account with after-tax dollars. Then, the returns that are generated from the account are allowed to grow tax-free. When you reach the age of 59 1/2, you can withdraw the money from the account without incurring any tax liability. With this type of account, you will be solely responsible for contributing to it, as your employer will not be able to.