Retirement Planning: What's the Difference Between Roth IRA and Roth 401(k)?
There are two main options in retirement accounts: Roth IRA and 401(k). Both types of accounts allow you to contribute funds after taxes, meaning you pay taxes up front when depositing money rather than later when you're withdrawing funds. However, despite their similarities, these accounts also have different perks and drawbacks, depending on your financial situation and retirement plan. Here are a few key differences between these types of retirement accounts.
1. Contribution amounts
If you have a lot of disposable income, a 401(k) might be more appealing to you. The ceiling on yearly contributions to a 401(k) is higher than a Roth IRA. Employees can contribute up to $16,500 per year, but the cap is set at $22,000 for workers over 50. In contrast, a Roth IRA only allows $5,500 per year and that amount increases to $6,500 at age 50. So if you earn more and would like to contribute more of it to your retirement, a 401(k) might be a better option for your financial situation.
A benefit of a Roth IRA is that you never have to withdraw or receive distributions from the account. It can exist, basically forever, without any required distributions. However, a Roth 401(k) will require distributions starting at age 70 and a half. Most of the time, the account holder is likely retired by that point and needs the money anyway. If you don't want to withdraw, you can probably convert your 401(k) into an IRA or transfer the funds to a new account. If you plan to be retired by then, a 401(k) might work well for you. If not, maybe you should consider a Roth IRA instead.
3. Match amounts
A benefit of a 401(k) is that an employer as the opportunity to match workers' contributions up to a certain percentage. This is basically free money. The match portion would be treated just like any other 401(k) contribution because it goes in pretax. Meaning, taxes will have to be paid on the money when it's time to distribute it. So you can't have employer matching contributions on a Roth 401(k). A Roth IRA doesn't have this perk for the same reason. The employer's money can't be put in after tax. However, nowadays, you'll be hard pressed to find an employer that does match amounts so this perk only applies in a few instances.
4. Income limits
Roth IRA accounts prevent contributions once you earn more than $176,000 in modified adjusted gross income for married couples. If you're single, the limit starts at $120,000. However, a Roth 401(k) has none of these restrictions. You can continue to contribute to your account regardless of your yearly income. If you're a high wage earner, a Roth IRA might not even ever be an option for you.
5. Borrowing against your account
With Roth 401(k), you can borrow up to 50 percent of the account balance or $50,000 — whichever is smaller. However, if the loan isn't paid back by the terms of the agreement when it comes time to take out the money, it could be considered a taxable distribution if you're under 59 and a half years old. This option isn't available with a Roth IRA, but there are some work arounds if you really want to take loan out against your balance.
**5) Borrowing against your account**
- 5 Differences Between A Roth IRA And A Roth 401k ›
- Roth IRA vs 401k? You May Not Have to Choose - The Simple Dollar ›
- IRA vs. 401(k): Where Should You Invest Your Money? - NerdWallet ›
- Roth IRA or Traditional IRA or 401k - Fidelity ›
- Comparison of 401(k) and IRA accounts - Wikipedia ›
- How Smart Savers Choose Between a 401(k) or Roth IRA | Money ›
Every time payday rolls around, I’m on top of the world. Jeff Bezos-level rich - even though I’m anything but. And then somehow the very next day, rent is due.
The cycle continues. The next payday, bills for my apartment. I find myself without a surplus of savings since I just moved and newly-furnished my apartment completely.
Even more terrifying is the looming presence of the holiday season. Halloween’s officially over and before we know it, hello Thanksgiving…and then there’s Hanukkah, Christmas, New Year’s. It’s insane.
I’ve been feeling very British lately. Not in a Union-Jack-obsessed, “Keep Calm and Carry-On” way. I went through that phase in 2012 with everyone else… no thank you. And it’s not even a surge of patriotism catalyzed by the Queen dying — I’m firmly team Diana and team Meghan.
Now that fall is officially here, the holidays will sweep in and I’ll have to contend with the fact that I won’t be spending them with my family in the UK. I went home to London earlier this year, so there’s not much left in my travel budget for another trip across the pond. A few domestic jaunts might be in my future, but the closest I’ll get to England this winter is watching Love Island and Love, Actually.
So in that spirit, I’ve been filling my days with content from my favorite Brits. I’m listening to all the old British rock bands I grew up listening to, patiently awaiting the new Arctic Monkeys album, and rewatching anything with Michaela Coel in it. I even shipped myself an order of British Baked Beans, so you know it’s dire.
I’ve also been watching British YouTubers like Grace Beverley — my favorite. Generally, I only go on YouTube to watch Vogue Beauty Secrets and AD Open Door videos. But I’m so glad I stumbled on Grace. Her content is a mix of London lifestyle (what lured me in), relatable entrepreneurship, and mindful productivity. I’m not a hustle-and-grind-girlboss, but as a creative person in a 9-to-5, I need all the help I can get to stay plugged in. So, the video “how to be really really really productive without getting overwhelmed” changed my approach to WFH.
Grace outlines her own productivity method: the to-do table. Instead of making a simple to-do list, she divides her tasks into a table that anyone can follow. As someone who’s survived with to-do lists for years, I recently implemented Grace’s method, and it’s revolutionized my workdays.
how to be really really really productive without getting overwhelmedwww.youtube.com
I follow her routine to a tee. Here’s how it works:
Essentially, she divides her daily responsibilities into four categories: quick ticks, tasks, projects, and non-negotiables.
- Quick Ticks: Actions that take less than 5-minutes
- Tasks: To-do’s that take up to 30-minutes. Probably don’t take too much brain energy.
- Projects: Long-term list items. These help guide your priorities, even if you’re not crossing them off in one day.
- Non-negotiables: Pick 3 things each day that you must get done. This is how you’ll truly measure success.
With everything written down and sorted, next address your schedule. Meetings, deadlines, and time blocks — whatever works best for you. Write it down. Then make a pact with yourself to stick to them.
This way of categorization provides a roadmap for prioritizing your day — making you far more productive. Have you ever spent the entire day on small tasks and then suddenly realized you hadn’t moved the needle on any task? Or do you spend way too much time on tasks that aren’t a priority? No more. With your non-negotiables laid out, you know what to laser-focus on and what to dedicate energy towards.
Also, it pays to know your working style. I’m not a morning person. Yet, I have to be up and at ‘em super early. So, first thing in the morning, I march through my Quick Ticks to warm me up. I set a time limit, so I can knock out some easy wins which is totally inspiring. Then I move on to bigger things without lingering on emails or admin. For others, it might be more helpful to tackle the big things with all that early-in-the-day brain power earlier.
Grace has great tips on avoiding overwhelm and burnout. My favorite is taking more intentional breaks rather than scrolling through social media. I call this scrolling “productive” because I’m “coming up with pitches.” Oh, the lies we tell ourselves. It’s more productive in the long run to giving my brain a break with non-screen related stimuli.
Grace’s solution? Set a timer to read a real, an actual book. I’ve never thought of this. It’s a genius way to check off some books on my TBR and kickstart my creativity. After reading a good book, I’m completely inspired to write. So having books near my desk helps me step away from the computer during my lunch break for an actual reset. (And yes, the current books I’m reading are by British authors: Assembly by Natasha Brown, and Love in Color: Mythical Tales from Around the World, Retold by Bolu Babalolu.)
In my pursuit of switching out my WFH set-up and getting my life together, I’ve engineered my workstation for success. With my new WFH essentials and Grace’s productivity technique, I’m revitalized for work — despite the fall blues and my melancholy about the pending holidays.
Here are the things getting me hyped for work and helping me crush my Grace Beverley-inspired to-do tables — no lists in sight:
Pack your bags — Southwest Airlines is having a major sale! Fares are as low as $59 one-way if you book by October 3rd.
This end-of-summer super sale is a game-changer for your travel plans through the end of the year. Summertime travel gets all the glory. But why not take advantage of your long weekends, holidays, and PTO this fall. You’ll be surprised at how much travel you can fit in. Keep the fall/winter season exciting with domestic trips that give you all the excitement without breaking the bank. All thanks to Southwest.
Here’s the breakdown:
Where can you go?
You’ll find discounted tickets to and from most airports. Sale fares apply to cross country travel, and even Hawaii, Mexico, and the Caribbean! Whether you’re visiting a new city or revisiting your last beach vacation, this sale has fares to make your travel dreams come true.
What do the fares cover?
Southwest Airlines has multiple fare tiers, each with various benefits. Wanna Get Away fares start at $59, while Wanna Get Away Plus fares start at $89. You can also find great deals on Anytime fares, which offer priority boarding and express lanes. Then there’s Business Select tickets for a luxe experience at an affordable price point.
Do you have to be a Southwest Rapid Rewards member?
You may think these sale fares are too good to be true. Is there a catch? Do you have to be a Southwest Rapid Rewards member to access them? You’re in luck — anyone can attain these fares for a limited time.
But, insider tip, you should consider signing up for Southwest Rapid Rewards. With a free sign up, you earn points and miles with each trip you take. And with this sale, each dollar you spend on these discounted tix can stretch super far until you eventually earn free travel. The only thing better than a sale is free stuff.
I’ve been browsing the Southwest Airlines site, checking out flights and dreaming.