The recent upheavals in the stock and housing market have caused many to stop and ponder and worry about their financial situation. Literally individuals have gone from being secure financially to being absolutely poor within a single day. In these hard and trying times many are asking the question “Is there any safe investment left for the average man?” Fortunately there are options beyond the stock market and other commodities. Roth IRA’s and 401(k)’s are a good and secure place to invest funds into at this time. While both of these are great options for any investor there are some key differences between them. This article will briefly list the key differences.

• Contribution amounts allowed:

One of the key differences between these two, is the amount allowed to be placed within these accounts each year. A 401(k) only allows up to $5,000 for individuals to set aside each year. The amount is higher for person over fifty; they are allowed $6,000 per year. An Roth IRA whether traditional or Roth allows a much higher amount per years. Almost three times the amount allowed by the former. The limit for individuals under fifty is $16,500 and for those over 50 the amount allowed is $22,000.

• Employer Match:

For individuals who are not self employed the added benefit of employer match is a strong difference between a 401(k) and IRA. The employee who chooses to employ the 401(k) can have their contributions matched by the employer up to a given percentage. This amount is determined chiefly by the employer. This is essentially free money that the employee gets for simply contributing. The Roth IRA offers no such program at all.

• Income caps to contributions:

Another key difference between these two is the cap that is placed upon the ability to contribute if the investor has an income over a given amount. A single person earning up to $120,000 or less is allowed to make a contribution to an Roth IRA, while individuals who make more than that are not allowed to do so , this is also true for married couples who make more than $176,000 a year. A 401(k) does not have any such limitations based upon income. Individuals are allowed to contribute regardless of their annual take income.

• Disbursement of Funds:

At the time of disbursement of funds a 401(k) will be at that time taxed. A Roth IRA, for example the Roth variety, will not be taxed at that time since it has already been taxed a much earlier time. This difference is significant and can radically alter the dispersed amount. The 401(k) also require disbursements to begin no later than when the individual is 70.5 years old. The Roth IRA again does not have any suck requirement.

While there are other smaller differences between these two varieties, these are the major differences between the two. Both will allow the investor to have a source of solid returns. The investor must decide which one of these works best for them and their financial goals.