What Is Better 401K Or Roth IRA? 
A 401K and a Roth IRA are quite different . The 401K plan is employer sponsored and may include matching funds from the employer . The limits to how much can be placed in the 401K are much higher . The amount you put into the 401K is untaxed income but fully taxed when the plan starts making distributions . All distributions incur income tax , and early distributions could be subject to a tax penalty . The Roth IRA is an individual plan that is restricted to people whose income is below a prescribed level . The contributions to the plan are made with after tax dollars ; however , the distribution at retirement is income tax free . Some companies do offer a Roth 401K , which is a marriage of the two plans . Contributions are made with after tax dollars but distributions are income tax free when received after age 59.5 . 