Why Is A Roth IRA Better Than A 401K?

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   David G. Pipes, CLU®, RICP®

   Business Development Officer, T.D. McNeil Insurance Services, Fresno, California

   A Roth IRA isn’t better.  A Roth IRA is different.  Contributions for a 401(K) reduce your current income tax.  Contributions to a Roth IRA do not.  Distributions from a 401(K) are fully taxable as ordinary income.  Distributions from a Roth IRA are not taxable at all.  The limits to how much you can put into a 401(K) are quite generous.  The limits to contributions to a Roth IRA are restrictive.  There are taxes and possible penalties if you withdraw money from a 401(K) prior to age 59.5.  You can withdraw from the capital invested from a Roth IRA without tax consequences.  There are advantages to both.

   Answered on June 12, 2014

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