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Roth IRA vs. 401k

A look at the world of Roth IRA limits and more investment details about these retirement plans.

Determining the best possible retirement plan for you is always going to be hard, as you want to pick something relatively safe, but that also will be fruitful enough to provide you with the tools to pay for your investment.  In most cases, you’re going to be thinking about Roth IRA vs. 401k, so that you can find the right avenue to invest your way to success.  The right investments can make for a very comfortable retirement, but also gives you the potential to run into a lot of trouble down the line, if you’re not prepared for the amount of money that you’re going to be putting in.  For that reason, really weighing Roth IRA vs. 401k is important, so that you can figure out the best type of investment for you.

The first thing to realize however, is that when you’re thinking about Roth IRA vs. 401k, both plans aren’t always available to everyone.  A 401k is only offered through an employer, so you would have to have one offered at your job in order to take advantage of it’s benefits.  But they are fairly reliable, and great alternatives to have for smart retirement planning.  A Roth IRA is a retirement account that you open, and that you openly use for your own investing.  However, you’re not able to get one if you make more money than the minimum that the IRS sets from year to year .

One of the main differences in Roth IRA vs. 401k, is the way in which they allow you to invest.  With a 401k, you’re only able to choose investments based upon what your employer provides.  That can be good and bad.  An employer can provide you with the avenue to take advantage of fantastic investments you couldn’t make otherwise.  But they could also only give you limited choice, so that you’re not able to find an investment that you really trust or believe in.  With a Roth IRA, you have a little more control and you’re able to actually pick your own investments.  However, you’re still limited by certain IRS rules as to which types of investments you’re actually allowed to make.

Another huge factor, is how much you’re allowed to actually put into the account year round.   When it comes to Roth IRA vs. 401k, there are very different standards of investment.  With a Roth IRA, you’re only allowed to put around $5,000 a year into the account for investing.  But a 401k allows you put more than 4 times that, on a yearly basis.  While you’re not choosing the investments completely, you will have more money to invest, which can really pay off in the long run.

Just remember not to over invest, no matter what you choose when you’re thinking about Roth IRA vs. 401k.  The biggest mistake you can make, is putting too much money in one investment.  That leaves you open for losing a big chunk of your retirement savings, and that’s something that nobody wants to suffer.  For that reason, always think about your decisions carefully beforehand, so that you can avoid making the wrong Roth IRA vs. 401k choice.