IRA, Roth IRA, and 401k: Which is Right for you?

by | Nov 23, 2022 | Fiduciary Financial Advisor, Miami Financial Advisor, Retirement | 0 comments

If you’re like most people, the words “IRA,” “Roth IRA,” and “401k probably make your eyes glaze over. Retirement account types can be confusing, and it’s hard to know where to start. Savings accounts, checking accounts, money market accounts…and then there are IRAs, Roth IRAs, and 401ks on top of that. It’s enough to make your head spin! IRA, Roth IRA, and 401k

When it comes to retirement planning, there are a lot of options and acronyms to choose from. It can be difficult to know where to start, or even what all the options mean. In this blog post, we’ll break down everything you need to know about IRAs, Roth IRAs, and 401ks so that you can make an informed decision about which account is right for you.


Never fear—we’re here to help. In this educational article, we’ll give you a brief overview of each type of retirement account so that you can make an informed decision about which one is right for you.


What is a IRA?

An IRA, or Individual Retirement Account, is a personal savings plan that gives you tax advantages when saving for retirement. With an IRA, you can set aside money each year up to a certain limit ($6,000 for 2022), and your investment will grow tax-deferred. This means that you won’t have to pay taxes on your earnings until you withdraw the money in retirement. However, you will have to pay taxes on any contributions that were made with pretax dollars when you withdraw the money in retirement.

Retiring Soon? IRA stands for Individual Retirement Account. An IRA is an account that you open and fund yourself (as opposed to a 401k, which we’ll discuss shortly). There are two main types of IRAs: Traditional and Roth. With a Traditional IRA, you make contributions with pre-tax dollars, which reduces your taxable income in the current year. Your money then grows tax-deferred until you withdraw it in retirement. With a Roth IRA, you make contributions with after-tax dollars, but your withdrawals in retirement are tax-free.


What is a Roth IRA?

A Roth IRA is similar to an IRA in that it’s a personal savings plan that offers tax advantages when saving for retirement. However, there are a few key differences. First of all, with a Roth IRA, you contribute money that has already been taxed—meaning that you won’t have to pay taxes on your earnings when you withdraw the money in retirement. Additionally, there are no mandatory distributions from a Roth IRA as there are from a traditional IRA—meaning that you can leave the money in your account to continue growing tax-free for as long as you “if you are the original Roth IRA owner

What is a 401k?

401k A 401k is an employer-sponsored retirement savings plan. With a 401k, employees can choose to have a certain amount of their paycheck automatically deducted and deposited into their 401k account. Like an IRA, 401ks offer tax advantages—your earnings grow tax-deferred, and you don’t have to pay taxes on the money until you withdraw it in retirement. Additionally, many employers offer matching contributions for 401k accounts up to a certain percentage, making it easier (and more lucrative!) to save for retirement.

401ks are one of the most popular ways to save for retirement, but they’re not one of the simplest. If your employer offers a 401k, here are six things you should keep in mind when choosing a plan.

  1. How much will it cost me?

Before you enroll in a 401k, find out how much it will cost you in fees. Many 401ks have fees for everything from investing in the plan to having an account balance. These fees can eat into your returns, so it’s important to know what they are and how they work.


  1. What are the investment options?

When you’re looking at 401ks, pay attention to the investment options offered. Some plans only offer a limited number of options, while others give you more choices. Make sure you’re comfortable with the investment options before you enroll in a plan.


  1. What is the employer match?

If your employer offers a 401k, they may also offer to match a certain percentage of what you contribute. For example, they may match 50% of your contributions up to 6% of your salary. This is free money that can help you reach your retirement goals, so make sure you understand how the employer match works before you enroll in a plan.


  1. When can I access my money?

Typically, you can’t access the money in your 401k until you retire or leave your job. However, some employer-sponsored plans may allow you to take out a loan if you meet certain criteria. If you think you may need to access your money before retirement, make sure you understand the rules before you enroll in a plan.


  1. How do I enroll?

Enrolling in a 401k is typically done through your employer’s benefits portal or website. If you’re not sure how to enroll, ask your HR department or financial advisor for help.


  1. What happens if I leave my job?

If you leave your job, there are a few things that could happen to your 401k account. You may be able to keep the account with your old employer, roll it over into an IRA (Individual Retirement Account), or cash it out (which incurs taxes and penalties). Make sure you understand your options before leaving your job so you can make the best decision for your retirement savings.


What are the benefits of each type of account?

There are several benefits of both IRAs and 401ks. Both accounts offer tax-deferred growth, which means that your money will grow without being taxed each year. This can result in significant growth over time. Another benefit of both accounts is that they offer penalty-free withdrawals for qualified expenses such as medical bills or higher education costs.


How do I decide which account is right for me?

There are several factors to consider when deciding whether an IRA or 401k is right for you. One factor to consider is whether your employer offers matching contributions on a 401k. If they do, this can be a great way to boost your retirement savings. Another factor to consider is whether you want the up-front tax deduction that a traditional IRA offers. If you think you might need access to the funds in your account before retirement age, an IRA might be a better option because there are no penalties for early withdrawals if used for qualified expenses.

There are a lot of factors to consider when deciding which type of retirement account is right for you—but hopefully this blog post has given you a better understanding of the basics so that you can make an informed decision. When it comes time to save for retirement, every little bit helps—so choose the account type that best suits your needs and start saving!  Hopefully this guide has given you a better understanding of IRAs, Roth IRAs, and 401ks so that you can make an informed decision about which account is right for your own personal situation. Retirement planning can be daunting but taking the time to research your options and understand how different accounts work is worth it in the long run!

To Learn More about your Retirement Options  set a time to speak with Manna Wealth Management.

Florida Financial Advisor


Disclaimer: The information and opinions expressed herein have been obtained from sources believed to be reliable but are not guaranteed for accuracy or completeness; are for information/educational purposes only; do not constitute a solicitation or recommendation for the purchase or sale of any security; are not unbiased/impartial; subject to change; may be from third parties. Opinions expressed are those of the Author and do not necessarily reflect those of B. Riley Wealth Management or its affiliates. Investment factors are not fully addressed herein. For important disclosure information, please visit   Finra Disclaimer



David Kassir

Managing Director | Manna Wealth Management
Miami Beach, Florida

Manna Wealth Management is revolutionizing the financial advisory industry by providing specialized advice to help individuals and families make smart investments for their future. For over 27 years, we’ve been helping our clients create meaningful wealth through a thoughtful and custom-tailored approach. Our mission is to unlock the potential of each individual client by offering a comprehensive range of services designed to meet their specific needs. With David Kassir as the driving force behind Manna Wealth Management, we strive to build lasting relationships with our clients.