Episode 71 - 401k vs Roth IRA: Which is Better?

In this episode, I dive into the key differences between retirement accounts—401(k), Roth IRA, and Traditional IRA—to help you create a tax-efficient plan for the future. I start with a story about two friends, James and Robert, who earned the same income but chose different retirement paths. James used a 401(k), deferring taxes now but paying them in retirement. Robert chose a Roth IRA, paying taxes upfront so he could enjoy tax-free withdrawals later. Fast forward 30 years—they both have $1 million, but Robert walks away with more after taxes. I explain why a 401(k) is appealing: pre-tax contributions, employer matches, and higher contribution limits. But I also cover the downsides—like taxable withdrawals and required minimum distributions (RMDs). Then I talk about Roth IRAs, which offer tax-free income in retirement, no RMDs, and more investment choices—though they do come with income and contribution limits. I also walk you through the difference between Traditional and Roth IRAs, and how converting a Traditional IRA to a Roth—when done right—can be a smart tax move. Bottom line: if you want both tax savings now and flexibility later, consider using a mix of retirement accounts. Your future self will thank you.