Whats Better 401(k) or Roth IRA?
One of the most frequently asked questions planners get about retirement planning is what’s better for retirement planning: a 401(k) or a Roth IRA. The answer may not be as straightforward as it might seem. WHAT ARE THE OPTIONS? 401(K) Under section 401(k) of the IRS code, a 401(k) is an employer-sponsored deferred contribution plan for retirement. In your workplace, you set up a 401(k) plan with human resources and choose options within the defined plan. Your employer takes money out of your paycheck prior to income taxes being taken out and deposits this into your 401(k) plan. Some employers even match your contributions. When you retire, you can decide to withdraw money out of the 401(k), but those withdrawals are subject to income tax when they are taken out 10,20, 30 years later. Currently, there are no income limitations on who can contribute, but an individual can contribute at most $15,500 to their 401(k) in 2008. $46,000 is the maximum aggregate amount that can be contributed
