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

A 401k is an employer-sponsored retirement plan where contributions are pre-tax, meaning you pay taxes on withdrawals. A Roth IRA, on the other hand, is individually opened and uses post-tax contributions, so withdrawals are tax-free. Essentially, you pay taxes now with a Roth IRA or later with a 401k. Both have specific contribution limits and rules.