2012-09-30, 08:34 PM
Zelkova Wrote:The position I just got doesn't give me access to my 401k until next year.
Would you mind explaining the differences between the two?
Well, they're not really comparable.
There are two different kinds of accounts - traditional and roth. Traditional is pre-tax. Money goes into it before federal/state tax is counted (but you still pay FICA), and it's a retirement account that grows tax deferred. Retirement withdraws are not tax free.
Roth is post-tax. You are taxed on the income, and you put the income into an IRA. Retirement withdraws are tax free.
Tax man gets his money either way.
401(k)s are typically Traditional, but Roth 401(k)s are starting to become a thing.
401(k)s have a 17k/yr contribution limit. Roth has a 5k/yr contribution limit.
Common with a 401(k) is an employer match. If you put in 5% of your earnings, the employer will match that earnings (giving you 5 + 5 = net effective 10%).
GIYF.