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"What's the difference between a 401(k) and a Roth IRA?"
Great question! Understanding the difference between a 401(k) and a Roth IRA is really important for your long-term financial planning, so let me walk you through it in detail.
A 401(k) is an employer-sponsored retirement savings plan that allows you to contribute a portion of your pre-tax salary into an investment account. Many employers offer matching contributions, which is essentially free money.
A Roth IRA, on the other hand, is an individual retirement account that you set up on your own, separate from your employer. The key difference is that you contribute after-tax dollars, meaning you've already paid taxes on the money you put in.
It's worth noting that many financial advisors recommend a combination of both...
401(k): pre-tax through employer; withdrawals taxed as income.
Roth IRA: after-tax and personal; tax-free in retirement.
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