whats the difference between a 401k, an ira and a roth ira?

Answer 1

A 401K and 403b are both retirement plans that are generally available at your place of work, and oftentimes your employer will contribute up to a certain percentage of your salary. These are pre-tax dollars at work, so if you have a plan available to you at your company, it would be well worth your while to participate. The differences between a 401K and 403b are subtle, and really, all that I know is that a 401K is for businesses, a 403b is for not-for-profits, like the government.

Then there is the IRA, short for Individual Retirement Account. The IRA is a tax-sheltered savings plan that, with compounded interest, over the course of the years can help you provide for your retirement. A regular IRA is sheltered because you do not pay taxes on the amount of money you are putting into the account each year, a break on your federal income tax return.

On the otherhand is a newer kind of IRA, the Roth IRA. The Roth IRA does not have the same kind of tax savings as a regular IRA, since you put post-tax dollars into it. However, when you get to retirement age and withdraw money from a Roth IRA, you are able to do so tax and penalty free. (In contrast, a regular IRA you would be taxed on the withdrawn money similarly to income taxes).

Answer 2

401K is a company sponsored retirement account. IRA is an individual account you set up and have on your own. Roth IRA is one of the 2 forms of IRA (traditional and Roth). A Roth IRA is after tax $ put into a retirement acct. and a traditional IRA is pretaxed 4 into an acct.
There are limits as to how much and when you can invest into each type of acct.

Answer 3

Simply stated:

401K is your employer sponsored. Part of your earnings are invested BEFORE tax. Many times (but not always), your employer will match your investments at certain percentage. You pay tax when you take the money out.

IRA is your own. You invest BEFORE tax money UNLESS your company has a qualified pension plan (like 401K), then you invest your after tax money. You pay tax when you take the money out.

ROTH IRA is also on your own. You ALWAYS invest your after tax money. You do NOT pay any tax when you take your money out.

Because there is a benefit of company match, 401K is generally considered the best choice. You can always do Roth IRA or IRA on your own in addition to doing 401K

Answer 4

1/ 401k is set-up by your employer following IRS regulation. the maximun limit for 2006 is 15000. in addition to your contribution, the best benefit is your employer macthing contribution certain % amount tax defer to help you planning for retirement.

2/ IRA( traditional) individual retirement account that mean you have to set up yourself through opened Brokerage, 2006 limit is 4000, if you 50 or old is 500 more. It has to be earn income money, tax deferr. meaning tax-deductable, you don't have to paid tax now, but after 59 and 1/2, tax on withdrawal.

3/ROTH IRA was created in 1998, also individual retirement account, after tax money, your net income, limit is 4000 in 2006,500 more for 50 or old, alson conform in IRS income limit. but the beauty is after 59 and 1/2 you can withdraw free and clear on earning and principle.

Let me run down the scenario:
if your gross income is 70000.00

with contribution 401k 15000.00
fund traditional IRA 4000.00
your taxable income is 70k-15k-4k==51k. but you have to pay tax at the withdrawal and penalty before 59 and 1/2. but after 59 and 1/2 only pay tax on widrawal.


with the ROTH IRA, your taxable income is 55k. on the roth part, withdraw is tax free

Answer 5

definite, Roth is after tax money yet you get to take it out with any develop simply by making an investment (after a definite age) once you decide on, how lots you decide on without government intervention or taxes - each and every cent of that's going to be yours no count number what the tax fee is once you retire. once you evaluate that basically approximately another highway of retirement money is taxed, this would be a super plus - definite, even social protection (if it nonetheless exists) is taxed! choose for the two, in case you may.

Answer 6

Yahoo Finance would be a good place to check out the differences