🤔Plan Comparison

Roth IRATraditional IRA401(k)

Contribution Limits*

$6,500 in 2023

$6,500 in 2023

$22,500 in 2023

Tax Treatment

After-tax contributions; tax-free qualified withdrawals

Tax-deferred contributions; taxable withdrawals

Tax-deferred contributions; taxable withdrawals

Tax Benefits

Tax-free growth

Tax-deferred growth

Tax-deferred growth

Tax Deductibility

Contributions are not tax-deductible

Contributions may be tax-deductible

Contributions may be tax-deductible

Required Minimum Distributions (RMDs)

Not required during the account holder's lifetime

Required starting at age 72

Required starting at age 72

Early Withdrawal Penalties

Contributions can be withdrawn penalty-free at any time; earnings subject to penalties and taxes if withdrawn before age 59½ and certain exceptions aren't met

Withdrawals before age 59½ subject to penalties and taxes; certain exceptions apply

Withdrawals before age 59½ subject to penalties and taxes; certain exceptions apply

Employer Involvement

Not employer-sponsored; opened and managed individually

Not employer-sponsored; opened and managed individually

Employer-sponsored; offered by companies to employees

Employer Matching

Not applicable

Not applicable

Common; employer may match a portion of employee contributions

Portability

Can be transferred to another Roth IRA or converted to a Traditional IRA

Can be transferred to another Traditional IRA or converted to a Roth IRA

Can be rolled over to an IRA upon leaving the employer or changing jobs

Contribution Flexibility

Can contribute at any age as long as you have earned income

Can contribute at any age as long as you have earned income

Contributions usually tied to employment with specific contribution windows

*for individuals under 50 earning less than $218,000.

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