Dallas Dutch Girl

I read an article where Suze Orman recommends Roth IRA’s and Roth 401(k)’s. Below is a clear breakdown of the key differences:

Contribution Limits

• Roth IRA: Lower annual contribution limit. For 2025, it’s $7K (or $8K if you’re 50+).
• Roth 401(k): Much higher limit—$23K in 2025 (or $30,500 if you’re 50+).

Employer Involvement

• Roth IRA: Opened and managed by the individual. No employer match.
• Roth 401(k): Offered through your employer. May include employer matching contributions, though those matches go into a traditional 401(k) account.

Income Restrictions

• Roth IRA: Has income limits. For 2025, single filers earning $165,000+ and joint filers earning $246,000+ can’t contribute directly.
• Roth 401(k): No income limits. Anyone with access through their employer can contribute regardless of income.

Investment Options

• Roth IRA: Offers more flexibility—you can invest in a wide range of assets (stocks, bonds, mutual funds, etc.).
• Roth 401(k): Investment choices are limited to the options provided by the employer’s plan.

Withdrawal Rules

• Roth IRA: You can withdraw contributions anytime tax- and penalty-free. Earnings are tax-free if you’re 59½+ and the account is 5+ years old.
• Roth 401(k): Withdrawals are tax-free under similar conditions, but early withdrawals are more restricted and may incur penalties.

Required Minimum Distributions (RMDs)

• Roth IRA: No RMDs during the account holder’s lifetime.
• Roth 401(k): RMDs are required starting at age 73 unless roll-over into a Roth IRA.

Summary Table
| Feature ……………………………| Roth IRA ………………………..| Roth 401(k)
| Contribution Limit …………….| $7,000 ($8,000 if 50+)….| $23K ($30,500 if 50+)
| Income Restrictions…………..| Yes ……………………………..| No
| Employer Match………………..| No ……………………………..| Yes (into traditional 401(k))
| Investment Flexibility…………| High ………………………….| Limited to plan options
| Early Withdrawal Flexibility….| More lenient……………..| More restricted
| RMDs……………………………….| None……………………….| Yes (unless rolled into Roth IRA)

If you’re deciding between the two, it often comes down to your income level, employer benefits, and how much flexibility you want in managing your investments.