ANSWERS: 1
  • Roth accounts are retirement accounts that provide slightly different tax benefits than traditional retirement accounts. Roth 401k and Roth 403b retirement accounts are only offered by employers, while Roth IRAs are individually managed accounts.

    Advantages

    Roth retirement accounts allow the money to grow tax free in the account and to be taken out of the account at retirement, tax free, under certain circumstances.

    Drawbacks

    A Roth account does not offer a tax break for contributions as does a traditional IRA, 401k and 403b. If you expect to be in a lower tax bracket at retirement, you may want to consider the traditional version of these accounts.

    Time Frame

    You can take qualified distributions from your Roth account when you reach age 59 1/2 and you made the first contribution to the account at least five years ago. If you have a Roth 403b or Roth 401k, the age limit drops to 55 if you leave your job. However, the account must still meet the five-year requirement.

    Considerations

    You can only put money in a Roth 401k or Roth 403b if the option is given by your employer. You can contribute to a Roth IRA if your adjusted gross income does not exceed the annual limits, which change each year and vary based on your filing status.

    History

    Roth IRAs were introduced in 1998, while Roth 401k and Roth 403b plans were first made available in 2006.

    Source:

    IRS: Roth IRA Rules

    IRS: Retirement Plans FAQs regarding Designated Roth Accounts

    AARP: Are Roth 401(k) and IRA Acccounts Right for Me?

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