What’s the difference between a 401k vs IRA Roth?

Question

As the title says, what’s the difference? It can be confusing. Thanks.

In: Economics

Answer 1

**401k:** Retirement account thru your employer, sometimes they add in money too.

**IRA:** Retirement account you open yourself, has much lower allowed contribution (>3x lower).

**Traditional:** Deduct contributions from annual income and pay the taxes when you withdraw.

**Roth:** Pay the income taxes now and withdraw with no additional taxes owed.

For an IRA there are income restrictions for Roth and then depending if you have a 401k at work then Traditional also has income restrictions.