2 thoughts on “February 2nd, 2013”

  1. Aaron Howard says:

    Roth IRA (Individual Retirement Arrangement) is a retirement fund, it can be based on a variety of investment types, that is not taxed when money is withdrawn. This typically is beneficial for those who will pay a higher tax rate in retirement

    401(k) allows employees to contribue pre-tax earnings to their retirement plan. However the money dispersed from the investment is taxed. This fund allowed employers to add matching funds to retirement at a rate fo 50% of the employee’s elective contribution.

    Roth 401k uses the same contribution rules at a 401(k) and can be automatically invested from payroll. However, once the money is invested in a Roth 401k it cannot be moved to a 401k except upon termination. distribution must be taken by age 70 which is not required under a ROTH IRA.

    Both types of funds have limits on the amount that can be invested annually or converted.

    The difference between a ROTH IRA and a ROTH 401k is the ROTH 401k allows for greater contribution to a ROTH style fund than the ROTH IRA. Also matching employer dollars can be applied to a ROTH fund.

    Both are funded with after-tax dollars

  2. Mike Finley says:

    That was a very good technical answer, Aaron. Let’s see if I can add to your comments. A Roth 401K can be found at your job and currently the max you can contribute to this account in 2013 is $17,500.

    A Roth IRA is a retirement account the individual opens outside of their company and the contribution limit for 2013 is $5,500. The contribution limits are higher for people 50 years and older. Most people (there are income limitations) can and should start a retirement fund at work and a separate Roth IRA outside of work.

    Whether one chooses the traditional 401K or the Roth version becomes rather complex as we try to figure out our taxable situation long into our future. Here is a basic rule of thumb. If you have the option, low to moderate income people should choose the 401K Roth (reduce taxes in the future). Moderate to high income people should choose the traditional 401K (get the tax deduction now).

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