Roth 401(k) vs. Roth IRA: Which One Is Better?

If I am a person who does not live in the USA but has a company in the USA, can I pay 401k to retire in the USA? By the way, I am not a US citizen.

Ok serious question. What's the difference between a 401k and a Roth 401k?

"bobbing and weaving between all of those variables was pretty impressive stuff" Just get both, since they are BOTH GREAT. And then whenever you want, you can easily roll/move the money from the Roth 401k into your Roth IRA, since they are both Roth accounts. Easy!

You can contribute to and max out BOTH Roth IRA and Roth 401k, correct? Meaning they each have their own separate contribution limits.

Do Roth 401k have the same 401k management fees?

I put money aside in pre tax (traditional 401k, up to the company match, sometimes more), and after tax accounts (roth ira and roth 401k). I'm in my mid 30s, I have roughly 4% of my paycheck go to a traditional 401k, 4% go to a roth 401k and I put $200/month into a roth ira. It's not a lot but it's something. The only regret I have is not starting to contribute to these accounts 5 or 10 years earlier. TIME is everything.

You guys need to update or make a new one of this topic because now (October 2023) starting in 2024 you don't have to take RMDs on Roth 401k. But transferring to a Rorh IRA is still probably a good idea.

There have been updates to the laws, ROTH 401Ks no longer have RMDs

Fees are lower on a Roth 401K than a Roth IRA.....

what is the different between Roth deferal and after tax deferal?

Why is the Roth 401k contribution limit so much higher? that doesn’t seem fair

If I have a Roth 401k and one of my investments issues a dividend. Does the dividend stay

inside the Roth 401k or does it go inside the traditional part of your account like a company match contribution?

So If I open a ROTH 401 K . Will I get taxed upfront?

Roth accounts are good for all income levels. They don’t necessarily earn more than a traditional account but you can invest more money if you pay all of the tax upfront.

Additionally, having traditional IRA’s may limit the maga back door strategy because a percentage of your aftertax and pretax contribution will be rolled into the Roth.

So my company offers traditional pretax 401k, Roth, and post tax options. My understanding is the $22,500 IRS limit applies to the pre tax and Roth options combined. But not the post tax contributions. My question is what’s the difference in the Roth and the post tax contributions? I can’t find the info on vanguard but they are both post tax contributions so I’m not sure of the difference…..

NOBODY asked about Traditional and you immediately jump into a non sequitur. Complete clickbait joke.

If doing Roth options only, the order of priority is to contribute to the Roth 401K to get the match, then fully fund the Roth IRA, then fully fund the Roth 401K. If a mega Roth (less popular) is an option for you, then you can also take advantage of that up to the max.

Not everyone qualifies for a Roth IRA or backdoor Roth.

So basically, with the Secure Act and backdoor ROTH IRAs, the only difference is fees and flexibility within investments within the accounts.

I have both. I believe Congress recently changed the RMD requirement, so check that out. The other thing I would add is sometimes certain 401(k) plans do not have many selections in the offered funds, so a self-directed Roth account will give you access to wide range of investment options. I would say get both and that way you can get past the 5-yr rule.

In five years, I would be retiring or working less hours, so I'm just curious about how people divide their income—specifically, how much goes to investments, savings, and consumption. I make about $165K a year, yet there is now nothing to show for it.

Why do our federal politicians who we elect into office go out of their way to make this so confusing? Is like filing taxes - which our federal politicians insist on making so darn confusing!!!!!

This video is about the Roth versions of 401k and IRA but they do touch on differences compared to Traditional. They mentioned there are income limits for contributions to a Roth IRA but no income limit to Traditional IRA contributions. While there are no income limits to Traditional IRA contributions, there is a limit to take those contributions as a deduction if you contributed both to the Traditional IRA AND an ERSP I believe.

With the new Secure Act 2.0, a Roth inside a 401K/403b/TSP don't have an RMD anymore.

Another benefit to 401K Roth’s - if you wish to merge them into a subsequent employer’s 401K program, assuming the rules of that employer’s program allows it, you can. Once the Roth money is moved out of your 401K to an independent Roth, you can no longer merge into a 401K.

Fees - my understating is if your company has a low cost 401K program like from Vanguard the 401K fees themselves are trivial. But also note the funds inside a 401K are often (usually?) institutional funds rather than retail investor finds… so the internal fund fees can actually be lower for a 401K Roth vs a Retail Roth.

Why did they mention the contribution limit as a negative for Roth IRA? Do a Roth conversion to get around that, no?

First 3 minutes had nothing to do with the question lol. You should do a much longer video on this.

Not that your followers would do this, but what about the fact that you can access your Principal contributions in a Roth IRA if needed in an emergency where you would not be able to access contributions and a Roth 401(k).

Another detail often not mentioned. With a Roth IRA you can take the contributions out at any time with no penalty or taxes. With a Roth 401k the contributions and earnings are mixed, so if you withdraw early (if your plan even allows it), you’re taxed according to the proportion of contributions and earnings even if you withdraw less than what you contributed.

If you're young a Roth is great because that provides tax-free compounding. But if you use a traditional and use the savings from the taxes you don't pay to also invest don't you get to invest more?
Say for somebody in the 22% tax bracket when you get to save a dollar in traditional compared to somebody using a Roth and can only save 78 cents

The Roth is awesome because it allows you for tax-free dollars in retirement.

And for say the bottom 70 or 80% of the people in this country does that provide any benefit because most of them are in lower tax brackets?
And for the rest of the population the top 20 or 30% don't they still have lower tax brackets to take advantage of because our tax system is progressive?

I just read a interesting study that took out the top 5% of the population the Uber rich. Without the top 5% the average tax rate of retirement was 6% effective with both state and federal tax combined. It just doesn't seem like the Roth would be good in general for most people

Max them all out if you can. I max out Roth IRA, Roth TSP, HSA, and throw money into my brokerage

Maxing out our company/self employed 401k then maxing out Roth IRA for the kids through our LLC and $10k 529 contribution.

You guys ever seen the little girl meme of "Why not both?"
That's the answer Zachary

Does fidelity have the best Roth IRA?

Great responses, and that's the way I understood it and take advantage of all three.

Side note: Some people out there say that you should only contribute to Roth 401K if you expect to make more income in the future...but isn't that true for the vast majority of people? I feel like the way that's worded makes people second guess their decision when it's really that simple.

Now with the new Roth rules, (if I’m not mistaken) catch up contributions will be Roth only now

In case Buddy doesn’t know….do both until you make too much money to contribute to the Roth IRA

I am maxing traditional 401k since I’m in a high tax state, then maxing my Roth IRA. I wish I can take advantage of the Roth 401k my company offers, but being taxed at 24% federal + 8.75% state just don’t seem to make sense to me right now.

Can we have a financial mutant show special for us 20 year olds? Give us the numbers for being in the top 5%, 1% of people.

Both! Nuff said!

Some quality responses alot of this info you have to pay someone in person for

Roth IRA vs Roth 401k doesn’t matter, useless you’re “ALWAYS BUYING”

Roth 401K is $22,500 for 2023 under 50 and an additional $7,500 for catch up 50 and over in 2023 .

My company doesn't offer a roth 401k option so I contribute max to my Roth IRA first then to my 401k.

Thanks gents for the great info. Last year my company opened up the option for the Fidelity Roth 403(b). I learned by watching this video that the limit is capped the same as my yearly contributions AND there is no income limit to the Roth 401(k). So now the question would be how much should I put in my Roth 403(b) and 403(b)?

I believe the new secure act made it so Roth 401ks don’t have rmds now