Question

What reasons would make you prefer a Roth IRA over a company 401(k) plan? List the reasons.

Why is a Roth IRA better than a regular Traditional IRA?

Answer 1

Hope, these points will clarify why Roth IRA has advantage over 401(k):-

Here are some advantages a Roth IRA has over a 401(k):

• Tax-free growth. The biggest benefit is the tax break. Since you invest in your Roth IRA with money that’s already been taxed, the growth isn’t taxed, and you won’t pay any taxes when you withdraw your money at retirement.
• More investing options. With a Roth IRA, you don’t have a third-party administrator deciding which funds you can invest in, so you can choose any mutual fund you like. But be careful: Always seek good advice when choosing mutual funds, and make sure you fully understand how they work before you invest any money.
• Set up apart from an employer. Unlike a workplace retirement plan, you can open a Roth IRA at any time as long as you deposit the minimum amount. The amount will vary based on who you open your account with.
• No required minimum distributions (RMDs). With a Roth IRA, you won’t be penalized if you leave your money in your account after age 70 ½ as long as you hold the Roth IRA for at least five years. Like the 401(k), you’ll be penalized for taking money out of a Roth IRA before age 59 ½ unless you meet specific requirements.
• The spousal IRA. If you’re married but only one of you earns money, you can still open an IRA for the non-working spouse. The spouse who earns money can invest in accounts for both spouses—up to the full amount! A 401(k), on the other hand, can only be opened by someone earning an income.