In many cases, a Roth IRA may be a better option than a 401 (k) retirement plan, as it offers more investment options and greater tax benefits. It can be especially useful if you think you'll find yourself in a higher tax bracket later on. Created by the Economic Growth and Tax Relief Reconciliation Act of 2001, Roth 401 (k) are a hybrid that combines many of the best parts of 401 (k) and traditional Roth IRAs to provide employees with a unique option when planning for retirement. An IRA is an individual retirement account that allows anyone with earned income (and even their spouse) to save for retirement with tax advantages.
Both Roth 401 (k) plans and Roth IRA plans use after-tax money, meaning the homeowner doesn't have to pay income taxes when receiving distributions.