Tax Treatment
Roth IRA
Contributions made with after-tax dollars. Withdrawals in retirement are tax-free if rules are met.
$6,500/year ($7,500 if age 50+). Income limits may restrict eligibility.
Contributions phase out based on income (e.g., $138,000–$153,000 for singles in 2024).
Not applicable.
Broad selection through self-directed accounts.
Contributions can be withdrawn at any time tax- and penalty-free. Earnings can be withdrawn tax-free after age 59½ and 5 years.
None during account holder's lifetime.
Individuals who expect to be in a higher tax bracket in retirement.
Traditional IRA
Contributions are pre-tax or tax-deductible; withdrawals are taxed as income.
$6,500/year ($7,500 if age 50+). No income limits for contributions but deductions may be limited based on income.
No income limits to contribute; deduction limits apply based on income and workplace plan coverage.
Not applicable.
Broad selection through self-directed accounts.
Withdrawals before 59½ generally incur a 10% penalty + income tax.
Required starting at age 73 (for 2024).
Individuals who expect to be in a lower tax bracket in retirement.
401(k)
Contributions are pre-tax, reducing taxable income; withdrawals are taxed as income.
$22,500/year ($30,000 if age 50+). Higher limits due to employer sponsorship.
No income limits to contribute; anyone with eligible earned income can participate if employer allows.
Often includes employer matching contributions, which boost savings.
Limited to the plan’s options, which may include mutual funds, ETFs, etc.
Withdrawals before 59½ generally incur a 10% penalty + income tax.
Required starting at age 73 (for 2024).
Employees seeking employer match or higher contribution limits.
Contribution Limits (2024)
Income Limits
Employer Match
Investment Choices
Withdrawal Rules
Required Minimum Distributions (RMDs)
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