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What the FAQ: How does a Roth IRA and a Roth 401(k) work?

What the FAQ: How does a Roth IRA and a Roth 401(k) work?

May 16, 2021
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If you’re adding into a 401(K) or another tax-deferred plan, you may want to consider adding a Roth IRA to your financial wheelhouse (or a Roth 401(K) if your employer offers it).  We made this short video to talk about the basics of these tax-advantaged plans.  Here are a few other features to note:

  • Roth IRA is “income-sensitive”; if your modified AGI is more than the amount the IRS allows, you are ineligible to contribute to a Roth IRA. A Roth 401(k) is NOT “income sensitive”, but is usually only offered through an employer.  We linked the IRS website for more information on income eligibility. 
  • The maximum contribution limit for a Roth IRA for 2021 it $6,000 ($7,000 if you’re over 50). The maximum contribution limit for a Roth 401(k) for 2021 is $19,500 ($26,000 if you’re over 50).
  • You can only add into a Roth IRA if you have earned or working income.
  • Unlike 401(k) plans and Traditional IRAs, Roth IRA accounts do not have a required minimum distribution (RMD) in retirement.  This means that you don't have to withdraw the funds at age 72 (as of the SECURE Act). 

There are other considerations for investing in a Roth IRA and Roth 401(k), many of which depends on your goals and situation.  Want to learn more about how to build wealth with these plans? 

Schedule your call with us todayContact | Vista Del Mar Wealth Management (vistadelmarwm.com).



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