Roth IRA vs. 403(b): Key Differences and Which Is Better for Your Retirement
Warren Team
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Key terms
- Roth IRAA retirement account where contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. Particularly beneficial for younger investors.
- IRA (Individual Retirement Account)A tax-advantaged retirement savings account that individuals can open independently. Traditional IRAs offer tax-deductible contributions, while Roth IRAs offer tax-free withdrawals in retirement.
- Backdoor Roth IRAA strategy that allows high-income earners who exceed Roth IRA income limits to contribute by first making a non-deductible contribution to a traditional IRA, then converting it to a Roth. The pro-rata rule may cause partial taxation if other traditional IRA funds exist.
- SEP IRASimplified Employee Pension IRA designed for self-employed individuals and small business owners. Allows higher contribution limits than traditional IRAs, up to 25% of compensation.
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