Both 401(k)s and Roth IRAs are popular tax-advantaged retirement savings accounts that differ in tax treatment, investment options, and employer contributions. Both accounts allow your savings to grow tax-free.
Contributions to a 401(k) are pre-tax, meaning they are deposited before your income taxes are deducted from your paycheck. However, when in retirement, withdrawals are taxed at your then-current income tax rate. Conversely, there is no tax savings or deduction for contributions to a Roth IRA. However, the contributions can be withdrawn tax-free when in retirement.
