Roth 401(k) vs Roth IRA: What’s the Difference and Which Is Right for You?

If you’ve heard of both a Roth 401(k) and a Roth IRA, you might wonder which one makes more sense for your situation—or whether you can use both.
While they share the same core concept—tax-free withdrawals in retirement—the rules, limits, and advantages differ in ways that matter for your plan.

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What Is a Roth 401(k)?

A Roth 401(k) is an employer-sponsored plan that combines the high contribution limits of a traditional 401(k) with the tax-free withdrawals of a Roth account.

You contribute after-tax dollars, which means you won’t get a tax deduction now, but qualified withdrawals in retirement (after age 59½ and five years in the plan) are completely tax-free.

Key features:

  • Higher contribution limits than a Roth IRA ($23,000 for 2025, or $30,500 if age 50+).

  • Employer match allowed—but matching dollars go into a traditional pre-tax bucket.

  • Automatic payroll deductions make saving easy.

  • Required Minimum Distributions (RMDs) begin at age 73 unless you’re still working.

A Roth 401(k) can be an excellent fit for high earners or business owners who want to save aggressively for retirement while locking in today’s tax rates.

If you own a small business or are self-employed, review retirement plan options for business owners to see how a Solo Roth 401(k) can work for you.

What Is a Roth IRA?

A Roth IRA is an individual retirement account that you open yourself—not through an employer.
Like the Roth 401(k), you contribute after-tax money and enjoy tax-free growth and withdrawals in retirement.

Key features:

  • Annual contribution limit of $7,000 (or $8,000 if age 50+).

  • No employer match, but full investment flexibility.

  • Withdrawals of contributions (not earnings) can be made anytime without penalty.

  • No Required Minimum Distributions during your lifetime.

A Roth IRA gives you control and flexibility—ideal for people who want to manage their investments directly or plan for long-term tax efficiency as part of a retirement income strategy.

Roth 401(k) vs Roth IRA: Key Differences

 

Feature Roth 401(k) Roth IRA
Who can open Offered by employer Opened individually
Contribution limits (2025) $23,000 ($30,500 age 50+) $7,000 ($8,000 age 50+)
Employer match Yes, but match is pre-tax Not available
Income limits None Phased out above $146k (single) / $230k (joint)
Investment choices Employer’s fund menu Almost unlimited
RMDs Yes (unless still employed) None during owner’s lifetime
Access to contributions No early access Contributions withdrawable anytime
Tax treatment After-tax contributions, tax-free growth and qualified withdrawals Same

Both accounts offer tax-free growth and withdrawals, but they serve different purposes depending on your income, employer options, and flexibility needs.

Can You Have Both a Roth 401(k) and a Roth IRA?

Yes—many savers use both.

You can contribute the maximum allowed to your Roth 401(k) through your employer and still fund a Roth IRA (if your income qualifies).
This combination provides:

  • High savings capacity

  • Broader investment options

  • Tax-free income flexibility in retirement

Your advisor can help determine how to balance contributions between them based on your income, tax bracket, and retirement timeline.

Which Is Right for You?

  • Choose a Roth 401(k) if you want to maximize savings, get employer matching, or your income exceeds IRA eligibility limits.

  • Choose a Roth IRA if you prefer full control, flexible investment choices, and the ability to skip RMDs later in life.

  • Use both when possible—especially if you’re building a comprehensive retirement income plan.

Tax and Estate Planning Considerations

Coordinating Roth strategies with tax planning, RMD timing, and legacy goals can create long-term efficiency.
Integrate Roth decisions into your broader portfolio and plan review to align withdrawals, conversions, and inheritance planning.

Get Professional Help With Your Roth Strategy

Genesis Wealth Management Group works with individuals and business owners to design tax-efficient retirement strategies—including Roth IRAs, Roth 401(k)s, and conversion planning.

If you’d like to evaluate your current retirement mix or explore adding Roth savings to your plan, schedule a discovery call.

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