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    Common Files

    Comparisons between Roth IRA, Roth 401k and Old Traditional 401k Retirement Plans

    Effective January 1st, 2006, employers now have the ability to combine the retirement options provided by traditional 401k retirement plans and Roth IRA plans into one effective plan, called simply, the Roth 401k. The Roth 401k is essentially similar to the traditional 401k and Roth IRA plans but differs in some ways as well. Below, we have outlined the main similarities and differences between the three:

    Workers who already have a 401k plan can take out a Roth 401k plan if their employer offers it. However, the total amount contributions by both the Roth 401k and the traditional 401k plan cannot exceed $16500 in the year 2011 (or $22,000 for employees over the age of 50). Participating in both plans means you can select how much money you want to put into each.
    Note: Be careful in selecting where you want to put your money, because once you do, you are not allowed to exchange or switch money between the plans.

    Comparison Table

    Roth 401k Plan
    Roth IRA
    Traditional 401k Retirement Plan
    Contributions made with after-tax dollars (after taxes have been paid). Contributions made with after-tax dollars (after taxes have been paid). Contributions made with before-tax dollars (BEFORE taxes have been paid).
    Money must be withdrawn before the age of 70.5 No maximum age before which money must be withdrawn Money must be withdrawn before the age of 70.5
    Cash Withdrawals from the plan are not taxable provided the retiree is atleast 59.5 years old and has had his account for >5 years Cash Withdrawals from the plan are not taxable provided the retiree is atleast 59.5 years old and has had his account for >5 years Cash withdrawals are taxable both at the Federal and Local State levels.
    Cash contributions are limited to $16,500 in 2011 ($22,000 for workers over the age of 50). Cash contributions limited to $5000 in 2011 ($6000 for workers over the age of 50). Cash contributions are limited to $16,500 in 2011 ($22,000 for workers over the age of 50).
    Is available under any income and tax brackets Income limits of:
    - Married couples ($160,000)
    - Singles ($110,000)
    - Adjusted Gross Income
    		 Is available under any income and tax brackets
    Investment grows without any tax deductions Investment grows without any tax deductions Investment is not taxable to Federal and State taxes as long as it is accumulating interest.
    - Upon withdrawals, the income is taxable

     

    		  

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