Roth IRA vs 401k vs Traditional IRA (WHICH TO PRIORITIZE?)

Which one is best when it comes to retirement, Roth Ira, 401k or for example traditional ira. In this video, I’ll teach you how these work and I’ll give you a system on the best way to prioritize your investment into them.

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1. Let's break Down what they are
- These are all just retirement account, some of them pay taxes today and never get taxed again like the Roth Options
- And some of them give you a tax break today and you pay taxes later on, like the normal traditional ones
- But they all share one thing in common and that is that your money grows tax-free

Basics:

Roth IRA or Roth 401k:
- You pay taxes today and you never pay them again
- You can always role over a Roth 401k into your Roth Ira which you fully manage after your done with your employer tax-free
- You can use a SEPP plan to go on for at least 5 years minimum or until you turn 59 and a half ( you can avoid taxes and penalties )

Traditional Ira
- Has the same limits of a Roth ira, which currently is $6000 annually
- This money will grow tax-free and also give you a tax benefit today
- But when it comes to taking your money out in the future you will be taxed on the current income tax rate ( you are required to start taking money out by 72 – Roth doesn’t have a requirement )
- You can also role over your 401k tax-free when you leave your employer

401k Plan, With has Roth option to or 403(b) but that’s another video for another day ( but its basically options for government employees, medical or non-profit employees also )
- Now the good thing with the 401k is that you can now invest up 19,500 a year, a lot more than the limit on Roth and Traditional Ira
- And also your employer might match some of the money you invest to incentives you to invest and also save money on taxes
- If a company offers a Roth 401k do it that, and have they’ll have the match go into a 401k

2. Strategy A ( Priority )
- If your employer has a Match
- Which always means free money
- If they have a Roth always do the Roth 401k, it’ll be better in the long term

What you want to do is this:
- You want to invest as much as needed to get the maximum match from your employer and all the free money
- Then you want to grab any additional money max out your Roth Ira
- And then if you have even more money, you can put towards maxing out your 401k
- And you have even more you can put into a Taxable account

Why:
- Because this way you get all the free money first
- But you also invest into your Roth which gives you more freedom with your money
- And if you have money left over you can max out with them

3. Strategy B
- If your employer doesn’t match
- Which sucks but happens

What to do:
- Max out your Roth IRA first so that’s $6k ( ps you can invest into traditional ira the limit is 6k between them both )
- Then you can max out the ROTH 401k they offer or the 401k option
- But remember, this money will be locked in for a long time ( so make sure you have an emergency fund and don’t invest more than 10%-25%)

Bonus: if you have kids you can also invest an additional 5% into a 529 account

When you leave your employer

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I'm an Accountant but I'm not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

[amyjones]

Thanks for telling us all about the different accounts. I wasn't sure which is best for me

[BMTV]

Yo!!! Your arms getting huge bro. Keep up the good work!

My mom is 56 and she has money saved up but she doesn’t have a retirement plan. Which one would you pick if your starting late ?

[aliciablanco]

Bitcoin is the future  , investing in it now is the wisest thing to do now especially the current rise

[TradingWithCJ]

Here for the algo bro! We dont have either in the uk

[MrTRANT]

What if employer doesn't offer 401k

[neyon]

Can I have both a Roth 401k and a Roth IRA?

[bighomie]

Im doomed 7 years in a 403b vested look like ima be taxed like crazy in my future...thanks i might make a change

[LuckyHearts]

Why do wave your cash around??? What's the purpose? It's tacky.

[slipperysnake]

What if you have a traditional IRA then convert it to a Roth in the future? Do you avoid taxes?

[lskatepopwar]

Why not just take it out when you are in the lowest tax bracket and in your 50s, certain adjustments can be made later to make sure you are in a low tax bracket? and let the greater amount of money compound?

[stephanieevans]

Great information on the difference between 401k and IRA. Thank you.

[allthingsinvestingandfinance]

Tommy Bryson always dropping the Golden Content. Great and informative video bro!

[haimeedwards]

Awesome video tommy and once again I'm going with a Roth IRA and Roth 401k no matter what so. I do not have a degree in economics but I do have common sense. Its simple when the time comes you retire live below your means be conservative and smart with your money and seriously plan for everything. And again I am a independent thinker The so called experts say put 5 to 6, 000 as a emergency fund Na I'm not doing that ima do It my way I'm putting the minimum at least 10, 000 I honestly feel like to me 10, 000 should be enough. At least as a bare minimum. Do not get the wrong idea I'm not gonna put to much in my emergency fund cause I'm smart enough to know that's not necessary to put so much but Idk about everyone I'm not speaking for everyone else but me I'm putting 10, 000 In my emergencies fund. Me personally Me only. But as always awesome video tommy 😃 keep the retirement content coming I like Once again tommy I'm 100% going with Roth ira and Roth 401k all the way bro😃😃😃

[SkylerJames]

Tommy, nice vid, I just released one on the same topic yesterday! Too many of the channels are focused on what stock to buy or sell, but choosing the right investment vehicle can be more important in the long run. Most people don't realize that TAXES are the largest expense over their lifetime, and finding ways to pay less of it is how you stay wealthy!

[jakeyd]

Hey Tommy love the videos! Could you maybe help explain how a public employee retirement system might factor into retirement? Would it be taking the place of a Roth IRA or 401k or would it be supplemental to those traditional retirement accounts?

[friendsinlowplaces]

In 2011, I had a 401k with the coal company I worked for, I elected 10% of my salary plus company matched up to 8% for mine foremans which is what I was. My salary back then was 101, 600.18 a year base mon - Fri, and $468 for a extra shift or a sat or Sunday work. I elected my extra shifts to go in my 401k, I worked 26 of every 28 days and doubled once a week, in 1 year when we shut the mine down I walked with $97k I have no idea what they had me invested in, I just know vanguard handled it I cashed it out like a dummy, I was only 27 didn't know any better I wish I'd rolled it Your video brought back some good memories, it's sad I've made over 100k for the past 21 years, and just the last 2 years have I learned how to handle I want to thank you my brother because it's people like you who've taught me what I should already know, I'm making damn sure my 3 sons learn right, and just wanted to say THANK YOU BRO your helping me build generational wealth and changing my life and you help me break the cycle of my kids becoming coal miners, they'll be able to get a good education and have a great life!!! 🍻🍻🍻