401(k), IRA, Roth Which is Right for You?

Traditional 401(k), Roth IRA, or something else? Each account has unique tax rules and benefits. Learn the differences and find the best fit for your financial situation.

Phase 1: Foundation First · 10 min read

🧭 The Account Alphabet Soup

401(k), Traditional IRA, Roth IRA, Roth 401(k) – it’s easy to feel overwhelmed. But choosing the right account can save you thousands in taxes and grow your wealth faster. This guide breaks down each option and helps you decide.

401(k)

Employer‑sponsored. Contributions are pre‑tax, reducing your taxable income now. Employers often match a portion – that’s free money! Withdrawals in retirement are taxed as ordinary income.

Traditional IRA

Individual Retirement Account. Contributions may be tax‑deductible depending on your income and whether you have a workplace plan. Growth is tax‑deferred; withdrawals are taxed.

Roth IRA

After‑tax contributions. No immediate tax break, but qualified withdrawals in retirement are completely tax‑free. Ideal if you expect to be in a higher tax bracket later.

Roth 401(k)

Hybrid option. Like a Roth IRA, but offered through an employer. High contribution limits, but required minimum distributions (RMDs) apply (unlike Roth IRAs).

Interactive: Which Account Should You Prioritize?

Answer a few quick questions to get a personalized recommendation and see the potential tax savings.






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This tool provides general guidance. Consult a tax professional for your specific situation. Contribution limits and phase‑outs change yearly.

📝 Test your knowledge: Retirement Accounts

1. What is the main advantage of a traditional 401(k) or IRA?
Tax‑free withdrawals in retirement
Tax‑deductible contributions now (tax‑deferred growth)
No income limits
Employer contributions are guaranteed
2. Which account offers tax‑free withdrawals in retirement (qualified distributions)?
Traditional 401(k)
Traditional IRA
Roth IRA
All of the above
3. What should you always do first if your employer offers a 401(k) match?
Open a Roth IRA instead
Invest in taxable accounts
Contribute at least enough to get the full match
Ignore it – it's not worth it
4. A Roth IRA has income limits for direct contributions. For 2024, a single filer with MAGI above ~$161,000:
Cannot contribute directly to a Roth IRA
Can still contribute the full amount
Must use a traditional IRA instead
Gets a larger tax deduction
5. Which statement about Required Minimum Distributions (RMDs) is true?
Roth IRAs have RMDs
Traditional 401(k)s and IRAs have RMDs
RMDs apply only to Roth accounts
RMDs start at age 59½

📘 Continue Phase 1: Foundation First

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