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Differences Between a Roth 401(k) and a Roth IRA

(You can have both a Roth 401(k) account and a Roth IRA account. The contribution limits are separate.)

  Roth 401(k) Roth IRA
Maximum contribution (2017) Lesser of $18,000 or 100% of compensation Lesser of $5,500 or 100% of earned income
Catch-up contribution if age 50 or older (2017) $6,000 $1,000
Who can contribute? Any eligible employee Only taxpayers who earn less than:
 Single/Head of Household:
 Married (filing jointly):
 Married (filing separately):
Lifetime required distributions after age 70½? Yes No
Potential employer matching contribution? Yes1 No
Creditor protection in bankruptcy Unlimited At least $1,283,025 (as of April 1, 2016, all IRAs aggregated)2
Loans available? Yes, if plan permits No
Five-year waiting period for qualified distributions? Yes, from time you contribute to the plan3 Yes, from time you contribute to ANY Roth IRA
Distributions4 Upon termination of employment, age 59½, hardship, disability, and death Any reason
Qualified tax-free distributions4 59½, disability, and death 59½, disability, death, first-time homebuyer (up to $10,000)
Nonqualified distributions Pro-rata distribution of tax-free contributions and taxable earnings Tax-free contributions distributed first, then taxable earnings
Rollovers To a Roth IRA, Roth 401(k), or
 Roth 403(b);
 From a Roth 401(k) or
 Roth 403(b)
To and from a Roth IRA;
 From a Roth 401(k) or
Roth 403(b);
 From a traditional IRA, 401(k), 403(b), or 457(b)5
Investment choices Limited to investments offered by employer Virtually unlimited

1 Employer contributions and earnings are taxable when distributed.

2 Amounts rolled over from an employer qualified plan or 403(b) plan, plus earnings on the amount rolled over, also have unlimited creditor protection.

3 Or from the time you contributed to a previous employer's Roth 401(k) plan, if you rolled over your balance from that plan to the current plan.

4 Depending on plan terms. Taxes and potential penalties apply to earnings paid in a nonqualified distribution.

5 Taxable conversion.