While the names may be similar, Roth IRA’s and Roth 401(k) contributions are different. Both investment options allow participants who earn compensation to contribute after-tax monies and both allow distributions of those after-tax monies and the associated income tax-free if certain conditions are met. Two key differences between them are the contribution limits to each and the need for Required Minimum Distributions from one and not the other.
Contributions to a Roth IRA are currently capped at $4,000 for 2008 ($5,000 for those age 50 and older). If your Modified Adjusted Gross Income (AGI) is above a certain level, you may not contribute at all to a Roth IRA. If you file your taxes as Single (or Married filing separately, living apart) that amount is $110, 000 for 2007. If you are Married filing jointly that amount is $160,000. Contributions to a Roth 401(k) plan are capped at $15,500 for 2007 (20,500 for those age 50 and older) with no restrictions based on your Modified AGI.
Required Minimum Distributions (for those age 70 ½ and older) are not currently required from a Roth IRA but are required from a Roth 401(k) plan. For more information on NADART’s Roth 401(k) plan option please complete our Product Information Request Form, call (800) 462-3278, ext. 7161 or e-mail nadart401k@nada.org.