Q: What Is the Difference Between a Roth 401(k) and a Roth IRA?

Roth 401(k)

A Roth 401(k) is a retirement savings plan set up by an employer for qualified employees.

Contributions are deducted from an employee’s check post-tax, meaning after federal and state taxes have been taken out. In some plans, the employer may also contribute by matching up to a certain percent of the employee’s contribution.

The maximum contribution that an employee under 50 can make in 2019 is $19,000. That total includes both their traditional 401(k) contributions and their Roth 401(k) contributions. If the employee is 50 or older, they may make an additional catch up contribution of $6,000.

Roth IRA

A Roth IRA in an individual retirement account. It allows a person to set aside post-tax income up to a specified amount each year. In 2019, it’s a $6,000 contribution maximum, with an additional $1,000 allowed for those 50 or older.

Roth IRAs are not set up through an employer.

Learn more about Roth IRA contribution limits from the IRS.

Expert advice, right in your inbox.

Subscribe to get the latest articles, information, and advice to help you better run your small business. Delivered weekly, for free.

Comments

*Required fields

Your email address will not be published.

Back to top