Are 401(k) And Roth IRA The Same? Compare Key Differences

Retirement savings accounts are more than just alphabet soup—they’re strategic tools that can shape your financial future. Two of the most popular options, the 401(k) and the Roth IRA, are often mentioned in the same breath, yet their differences can be confusing for individuals and business leaders alike. Both accounts offer attractive tax advantages and the promise of long-term growth, but the rules, benefits, and even who can participate vary in ways that can have a major impact on your retirement outcomes.

If you’ve ever wondered whether a 401(k) and a Roth IRA are essentially interchangeable, or if combining them could supercharge your retirement strategy, you’re not alone. The distinctions between these accounts—how contributions are taxed, who’s eligible, what you can invest in, and how you access your money down the road—make a world of difference when planning for the years ahead.

This guide breaks down the key differences between 401(k) plans and Roth IRAs, offering clear comparisons, actionable examples, and practical tips for making the most of each. Whether you’re an employee evaluating your workplace benefits, an individual investor mapping out your savings, or a business owner responsible for sponsoring a retirement plan, you’ll find the clarity you need to make informed decisions. And for plan sponsors looking for expert guidance on 401(k) administration and fiduciary support, you’ll discover how Summit Consulting Group, LLC can simplify compliance and help protect your business. Let’s explore how each account works and how you can leverage their strengths to build the retirement you deserve.

What Is a 401(k)?

A traditional 401(k) is an employer-sponsored retirement plan governed by ERISA (the Employee Retirement Income Security Act). Under this framework, plan sponsors set up formal documents—like the Summary Plan Description (SPD) and plan adoption agreement—that define how contributions are collected, invested, and distributed. Unlike individual IRAs, 401(k) plans live on the company payroll system, offering employees a streamlined way to build retirement savings through automatic deductions and professional oversight.

Definition and Key Features

A 401(k) is classified as an ERISA-qualified retirement plan, which means the employer (or its appointed fiduciaries) must follow strict rules to protect participants’ interests. Contributions are made with pre-tax dollars, directly reducing each pay period’s taxable income. That tax deferral can translate into meaningful savings today, while investment gains grow on a tax-deferred basis until withdrawal. Employers serve as plan sponsors, holding plan assets in trust and naming fiduciaries—often a committee or third-party administrator—to handle everything from compliance testing to vendor selection.

How Contributions Work

Employees elect a percentage (or dollar amount) of their pay to flow into the 401(k) via payroll deferral. For 2024, individuals under age 50 can contribute up to $23,000 per year, with an additional catch-up contribution of $7,500 available to those 50 or older. Deferrals happen automatically, which encourages disciplined saving. Plans may also allow Roth contributions—deferrals made with after-tax dollars—though those follow separate rules. Employers update contribution limits each year to keep pace with inflation, so checking the latest IRS guidelines is a good habit.

Employer Matching Contributions

Many companies sweeten the deal by matching a portion of employee contributions. A common formula is 100% of the first 3% of salary deferred, plus 50% of the next 2%, for a total match equal to 4% of pay. These matches can significantly boost retirement savings—and research from the Bureau of Labor Statistics highlights that the promise of a match strongly influences participation rates¹. However, employer contributions often vest over time (see next section), meaning you may need to stay on the payroll for a few years before claiming the full match.

Investment Options and Vesting

Unlike an IRA where you pick any fund a custodian offers, a 401(k) plan’s investment menu is selected by the sponsor. Typical options include a lineup of mutual funds, target-date funds and, occasionally, company stock. Employee deferrals are always 100% vested—you own every dollar you contribute. Employer matches, on the other hand, usually vest according to a schedule outlined in plan documents (for example, 20% per year over five years). Understanding your plan’s vesting rules is crucial, especially if you’re considering changing jobs.

Required Minimum Distributions (RMDs)

Once you reach age 73, the IRS requires you to begin taking annual withdrawals—called Required Minimum Distributions—from your traditional 401(k). RMD amounts are calculated using IRS life expectancy tables and your account balance at year-end. Some plans permit rollovers to an IRA or in-service distributions (withdrawals while still employed), offering flexibility in how and when you tap your savings. Failing to take an RMD—or withdrawing less than the calculated amount—can result in hefty penalties.

Who Can Participate

Eligibility for a 401(k) plan is set by the employer, but most plans allow any employee age 21 or older with at least one year of service (or sometimes just a few months) to enroll. Auto-enrollment features are becoming more common, automatically signing up new hires unless they opt out. Unlike IRAs, there are no income limits or phase-outs: as long as you meet your employer’s age and service criteria, you can participate regardless of how much you earn.

¹Bureau of Labor Statistics, “401(k) Matching Contributions and Participation,” https://www.bls.gov/osmr/research-papers/2010/ec100020.htm

What Is a Roth IRA?

A Roth IRA is an individual retirement account you open and fund with after-tax dollars through a bank, brokerage, or other financial institution. Unlike employer-sponsored plans, it’s entirely self-directed—meaning you choose the custodian, the contributions come from your own bank account or paycheck withholding, and you retain control over investment decisions. Because you’ve already paid income tax on every dollar you contribute, qualified withdrawals of both your principal and investment earnings in retirement are generally tax-free.

This account can serve as a valuable complement to a 401(k) because it offers different tax treatment and more flexible withdrawal rules. By diversifying between pretax and after-tax vehicles, you gain added control over your taxable income down the road.

Definition and Key Features

• After-tax contributions: Money you deposit into a Roth IRA is taxed in the year you earn it, so you don’t get an upfront deduction.
• Tax-free qualified withdrawals: If you meet certain requirements, distributions in retirement—including investment gains—come out tax-free.
• Individual control: No ERISA governance or plan sponsor; you select the custodian and the investments.
• Contribution deadline: You have until the federal tax filing deadline (typically April 15) to make contributions for the prior tax year.

How Contributions Work

You fund a Roth IRA by wiring or transferring money from your checking or savings account to the IRA custodian. Most platforms let you set up recurring deposits—weekly, monthly, or per pay period—to make saving automatic. For tax year 2024, you can contribute up to $7,000 if you’re under age 50, with an extra $1,000 catch-up available if you’re 50 or older. Your custodian will track your contributions and alert you if you approach or exceed those limits.

Income Eligibility and Phase-Outs

Not everyone can contribute the full Roth IRA limit—your ability to participate depends on your modified adjusted gross income (MAGI). For 2024:

• Single filers phase out between $146,000 and $161,000.
• Married joint filers phase out between $230,000 and $240,000.
• Married filing separately (if you lived with your spouse at any point) can’t contribute once MAGI exceeds $10,000.

If your income is too high, you may still use a backdoor Roth strategy by contributing to a traditional IRA and converting those funds. For full details, see IRS Publication 590-A.

Investment Options and Flexibility

A Roth IRA typically offers the broadest menu of investments you’ll find in a tax-advantaged account. Depending on your custodian, you can choose from:

• Individual stocks and bonds
• Mutual funds and exchange-traded funds (ETFs)
• Real estate investment trusts (REITs)
• Certificates of deposit (CDs) and money market funds
• Alternative assets (some custodians allow cryptocurrency or private equity)

That flexibility lets you tailor your portfolio to your risk tolerance and retirement timeline. If you prefer a hands-off approach, many brokerages and robo-advisors offer target-date or model portfolios.

Qualified Withdrawal Rules

Roth IRAs shine when it comes to accessing your money. You can withdraw any amount up to your total contributions at any time, for any reason, without tax or penalty. To take earnings tax- and penalty-free, you must:

1. Be at least age 59½, and
2. Have held your first Roth IRA contribution for at least five years.

There are a few exceptions—such as a one-time $10,000 distribution for a first-time home purchase, certain medical expenses, or disability—that allow you to tap earnings early without penalty.

No Required Minimum Distributions

One standout benefit of Roth IRAs is that you’re never forced to take withdrawals during your lifetime. There are no Required Minimum Distributions (RMDs) for the original owner, which gives you full control over when and how much you pull out. That makes the Roth IRA a terrific estate-planning tool: you can leave tax-free assets to heirs and pass along the potential for decades of further growth.

Side-by-Side Comparison of 401(k) and Roth IRA

To see how a traditional 401(k) and a Roth IRA measure up, here’s a high-level snapshot of their key features. Following the table, we’ll unpack each category so you can understand what really sets them apart.

Feature	401(k)	Roth IRA
Tax Treatment	Pre-tax deferrals; distributions taxed as income	After-tax contributions; qualified withdrawals are tax-free
Contribution Limits (2024)	23,000 + 7,500 catch-up (age 50+)	7,000 + 1,000 catch-up (age 50+)
Income Limits	No MAGI ceiling; employer-defined eligibility	Phase-out by MAGI: single 146K–161K; joint 230K–240K
Employer Match	Often available; vesting schedules apply	Not available
Early Withdrawal	Penalty + income tax before 59½; loan options vary	Contributions anytime tax- and penalty-free; earnings subject to rules
Required Minimum Distributions (RMDs)	Mandatory starting at age 73	No RMDs for original owner
Investment Options	Limited menu selected by plan sponsor	Broad choice: stocks, bonds, ETFs, mutual funds, REITs, more

While this table highlights the core distinctions, each point can affect your tax bill, savings pace, and flexibility. Below, we examine each comparison in more detail.

Tax Treatment Comparison

With a traditional 401(k), your contributions are deducted from your paycheck before income tax is calculated, lowering your current taxable income. You’ll pay ordinary income taxes on distributions in retirement. In contrast, a Roth IRA is funded with dollars you’ve already paid tax on today. Those after-tax contributions grow inside the account, and once you meet the holding and age requirements, both principal and earnings come out tax-free.

Contribution Limits Comparison

Contribution limits can make a big difference in the amount you can squirrel away each year. For 2024, employees under age 50 can defer up to 23,000 into a 401(k), with an additional 7,500 catch-up for those 50 or older. Roth IRAs cap out at 7,000 per year, plus a 1,000 catch-up after age 50. If you’re aiming to maximize retirement savings, those extra dollars in a 401(k) can add up quickly—though the Roth IRA still offers valuable tax diversification.

Eligibility and Income Limits Comparison

Your ability to participate in a 401(k) hinges solely on your employer’s plan rules—typically an age and service requirement—but not on how much you earn. A Roth IRA, by contrast, has strict MAGI phase-outs: for 2024, single filers with AGI above 161,000 and joint filers above 240,000 cannot contribute directly. High earners may need to consider a backdoor Roth strategy if they want tax-free growth.

Employer Contributions Comparison

Few perks beat “free money.” Many employers match a portion of your 401(k) deferrals, subject to vesting schedules that gradually lock in their contributions. Roth IRAs don’t have an employer match—any boost in that account comes solely from your own deposits and investment returns.

Withdrawal Rules Comparison

If you tap a 401(k) before age 59½, you’ll generally face a 10% penalty plus income tax, though some plans offer loan features or hardship withdrawals under limited circumstances. Roth IRAs are much more forgiving: you can withdraw any amount of your original contributions at any time without tax or penalty. To access earnings tax-free, you must be at least 59½ and meet the five-year rule (with some exceptions, like first-time home purchases).

RMDs Comparison

The IRS requires you to begin taking RMDs from most 401(k) plans starting at age 73. Withdraw too little—or miss a withdrawal entirely—and you may owe steep penalties. Roth IRAs impose no RMDs on the original account owner, giving you full control over when and how much you withdraw in retirement.

Investment Options Comparison

A 401(k) plan’s menu is chosen by the sponsor and usually limited to a handful of mutual funds, target-date series, or company stock. A Roth IRA at a brokerage or robo-advisor opens the door to a much wider universe: individual equities, ETFs, bond funds, REITs, CDs, and even alternative assets in some cases. That flexibility allows you to tailor a portfolio that matches your goals and risk tolerance.

Tax Advantages and Long-Term Growth

When you’re staring down decades of saving and compounding returns, the way each dollar is taxed can make a noticeable difference in your nest egg. Pre-tax and after-tax accounts each offer unique paths to growth—and understanding how they work together can help you keep more of your earnings over the long haul.

Pre-Tax vs After-Tax Contributions

Pre-tax contributions (found in a traditional 401(k)) reduce your taxable income in the year you make them. For example, if you earn $75,000 and defer $10,000 pre-tax, you’re taxed on $65,000 instead of $75,000. That immediate tax savings can free up cash for other goals or allow you to invest more. In contrast, Roth IRA contributions come from after-tax dollars—every dollar you contribute has already been taxed at your ordinary rate. While you don’t get a deduction today, you lock in the benefit of tax-free withdrawals later. It’s a trade-off: pay Uncle Sam now and skip taxes on growth, or save on today’s tax bill and pay when you pull the funds out.

Tax-Deferred Growth vs Tax-Free Growth

Whether you invest inside a pre-tax or after-tax vehicle, your returns compound in the meantime. Using the standard compound-interest formula—

A = P * (1 + r)^n

—your initial principal (P) grows by rate (r) each year over n years. Inside a 401(k), those earnings build tax-deferred, meaning you pay no annual taxes on dividends or capital gains. In a Roth IRA, earnings grow tax-free and, assuming you meet the withdrawal rules, come out of your account free of income tax. Over a 30-year horizon at 7% annual growth, a $10,000 investment would become about $76,000 whether it’s tax-deferred or tax-free—what changes is how much you keep when you start spending.

Impact of Future Tax Brackets

One of the biggest unknowns is what tax rates will look like when you retire. If rates climb, the dollars you withdraw from a 401(k) may be taxed at a higher percentage than when you deferred them. A Roth IRA provides insulation: since you’ve already paid tax, those withdrawals won’t be subject to future rate hikes. Conversely, if you anticipate a lower bracket in retirement—perhaps because you downshift to part-time work or your income streams change—dialing up contributions to a pre-tax 401(k) could yield a bigger upfront tax break and lower effective tax rate later. Balancing both account types can act as a hedge, giving you the flexibility to choose the most tax-efficient bucket each year.

Estate Planning Benefits

For anyone thinking beyond their own lifetime, Roth IRAs offer a clear advantage: there are no Required Minimum Distributions (RMDs) for the original account owner. That allows your assets more time to compound, potentially growing tax-free for decades. When heirs inherit a Roth IRA, they still enjoy tax-free distributions—though they generally must empty the account within 10 years. By contrast, inherited 401(k) assets are taxed as ordinary income and subject to RMD rules. If leaving a legacy is part of your plan, stacking tax-free Roth assets alongside tax-deferred balances can optimize both your cash flow in retirement and the gift you pass on to loved ones.

Contribution Strategies: How to Maximize Savings

Crafting the most effective contribution strategy ensures you’re putting every available dollar to work toward your retirement goals. Below are practical steps to optimize your savings across both a 401(k) and a Roth IRA.

Prioritizing Employer Match

Employer matching contributions represent immediate, risk-free returns on your investment—so it’s wise to capture the full match before doing anything else. For example, if your company offers a dollar-for-dollar match on the first 4% of your salary, you should defer at least 4% of your paycheck into your 401(k). On a $60,000 annual salary, that means contributing $2,400 to receive the full $2,400 match. Missing out on the match is effectively leaving free money on the table.

Allocating Between 401(k) and Roth IRA

Once you’ve secured the employer match, the next step is to balance contributions between your 401(k) and a Roth IRA:

1. Max out any match-eligible contributions to your 401(k).
2. Contribute to a Roth IRA up to the annual limit ($7,000 for 2024, or $8,000 if you’re 50 or older) to benefit from tax-free growth and withdrawal flexibility.
3. If you still have room in your budget, return to your 401(k) and defer additional pre-tax dollars up to the plan’s limit.

This sequence—match, Roth, then extra 401(k)—gives you both an immediate tax break and a source of tax-free income in retirement. However, if you anticipate being in a significantly lower tax bracket when you retire, you might choose to prioritize extra 401(k) contributions ahead of Roth funding.

Catch-Up Contributions for Ages 50+

For savers age 50 and over, both retirement vehicles offer boosted contribution limits:

• 401(k): an additional $7,500 catch-up contribution (increasing the 2024 limit from $23,000 to $30,500).
• Roth IRA: an extra $1,000 (bringing the 2024 limit from $7,000 to $8,000).

If you’re within the catch-up window, consider using these extra dollars to close any savings gap before retirement.

Super Catch-Up Contributions (Ages 60–63)

Under the SECURE 2.0 Act, savers aged 60 to 63 can make “super catch-up” 401(k) contributions of up to $11,250 in 2025—an increase over the standard $7,500. If your plan allows these additional deferrals, they can fast-track your savings in the final years before RMDs begin or retirement kicks in.

Automating Contributions and Avoiding Penalties

Consistency is key. Automate your 401(k) deferrals through payroll and set up automatic transfers from your checking account to your Roth IRA. This “set-and-forget” approach smooths out market volatility and keeps you on track without having to remember each month. Finally, monitor your contributions to ensure you stay within IRS limits; overcontributing can trigger penalties and excess contribution taxes. A quick quarterly review of your pay stubs and IRA statements can help you avoid surprises at tax time.

By following this structured sequence—prioritizing your match, leveraging Roth advantages, maximizing catch-up opportunities, and automating deposits—you’ll harness every benefit these accounts have to offer and move confidently toward your retirement goals.

Using Both a 401(k) and a Roth IRA: Is It Possible?

Yes—holding a 401(k) and a Roth IRA at the same time is perfectly legal and often recommended. Because they’re governed by different rules and limits, you can take advantage of both accounts to boost your total retirement savings, enjoy a mix of tax treatments, and gain more flexibility when it’s time to tap your nest egg.

IRS Rules on Dual Contributions

The IRS treats 401(k)s and Roth IRAs as separate buckets, so each has its own annual contribution limit. For 2024, you can defer up to $23,000 (plus a $7,500 catch-up if you’re 50 or older) into your 401(k), and you can contribute up to $7,000 (plus a $1,000 catch-up) into a Roth IRA. There is no rule that your contributions to one account reduce what you can put into the other—you simply need to meet each account’s eligibility criteria. Just be mindful of income phase-outs for Roth IRAs and any plan-specific rules from your employer.

Benefits of Tax Diversification

Stacking a pre-tax 401(k) alongside an after-tax Roth IRA gives you more control over your tax bill today and in retirement. A 401(k) lowers your taxable income now, which can be a boon if you’re in a higher bracket. A Roth IRA locks in tax-free withdrawals later, insulating part of your savings from future rate hikes or bracket creep. By splitting contributions across both, you build two distinct pools—taxable and nontaxable—to draw from. That flexibility can help you manage your taxable income in retirement, optimize Social Security taxation, or leave a tax-efficient legacy to heirs.

Planning Contributions to Stay Within Limits

A clear contribution sequence can help you maximize every dollar:

1. Enroll in your 401(k) and contribute at least enough to capture the full employer match.
2. Open a Roth IRA (if you qualify by MAGI) and fund it up to the annual limit.
3. Return to your 401(k) to defer additional pre-tax dollars up to the plan’s limit.
4. If you’re over 50, don’t forget the catch-up windows—$7,500 more per year in a 401(k) and $1,000 extra in a Roth IRA.
5. High earners who exceed the Roth IRA income phase-out may consider a backdoor Roth conversion after funding a traditional IRA.

Automating both your payroll deferrals and IRA transfers ensures you stay on track without manually monitoring every dollar.

Example Scenarios

• Mid-Career Saver
Jamie, age 40, contributes 6% of her salary to get the full 4% employer match, then directs $7,000 to a Roth IRA. After those steps, she increases her 401(k) deferral to 15% of pay, blending pre-tax savings with tax-free growth.

• High Earner with a Backdoor Roth
Alex earns $250,000 and phases out of direct Roth IRA eligibility. He maxes his 401(k) at $23,000, funds a traditional IRA with $7,000, then converts it to a Roth IRA. This “backdoor” strategy gives him the Roth’s tax-free benefits despite high income.

• Pre-Retiree Tax Strategist
Priya, age 62, has both accounts nearly maxed. She uses her super catch-up option to add $11,250 to her 401(k) in 2025, then tops off her Roth IRA. In retirement, she’ll draw from her Roth first to manage taxable income and control which tax brackets she occupies.

By combining these two powerful tools—while respecting each account’s rules—you can supercharge your retirement strategy and tailor your tax exposure now and down the road.

Getting Started: Enrolling in a 401(k) and Opening a Roth IRA

Jumping into retirement saving doesn’t require a finance degree—just a few straightforward steps to set up each account and make contributions automatic. Below, you’ll learn how to enroll in your employer’s 401(k), pick the right investment options, open a Roth IRA on your own, and create a contribution schedule that keeps your savings on track.

Enrolling in an Employer-Sponsored 401(k)

Begin by contacting your HR or benefits department to request the plan’s Summary Plan Description (SPD) and enrollment forms. Most employers now offer an online portal where you can log in with your employee credentials. On that platform you’ll:

• Choose between pre-tax or Roth (after-tax) deferrals, if your plan allows
• Elect a deferral rate (often a percentage of each paycheck)
• Review vesting schedules and automatic escalation features

Once you submit your elections, your payroll department will route contributions directly into your 401(k). Enrollment windows vary by employer, but many plans allow you to join immediately or as soon as you satisfy a service requirement (for example, 30 or 90 days on the job).

Choosing Investments in Your 401(k)

With enrollment complete, the next step is investment selection. Plans typically offer a limited menu—mutual funds, target-date series, and sometimes company stock. To narrow your choices:

1. Review each fund’s prospectus for objectives and expense ratios.
2. Consider a target-date fund if you prefer a one-stop portfolio that adjusts its allocation over time.
3. Build your own core lineup by mixing stock, bond, and stable-value funds to match your risk tolerance.

If you’re unsure where to start, many plans include a default “qualified default investment alternative” (QDIA), which often takes the form of a target-date or balanced fund.

Opening a Roth IRA

Unlike a 401(k), a Roth IRA lives at the institution of your choice—brokerage, bank, or robo-advisor. To open one:

• Compare custodians on fees, account minimums, and available investments.
• Complete an online application with your Social Security number, beneficiary information, and employment details.
• Link your checking or savings account for contributions.

Most brokers let you set up recurring transfers—weekly, monthly, or per pay period—so you can funnel money into your Roth IRA without lifting a finger.

Setting Up Contributions and Investment Allocations

Once your accounts are open and funded, automate everything:

• In your 401(k), confirm the payroll deferral percentage you elected.
• In your Roth IRA, establish an automatic transfer that aligns with your pay cycle or budget.
• Allocate new contributions according to the portfolio mix you chose—equities, bonds, or target-date series.

Automation smooths out market ups and downs and ensures you don’t miss a deadline or exceed IRS limits.

Monitoring and Adjusting Over Time

Even the best-built portfolios need occasional tuning. Schedule an annual check-up—perhaps coinciding with your birthday or New Year’s—to:

• Compare your actual asset allocation to your target mix
• Rebalance by selling overweight positions and buying underweight ones
• Increase deferrals when you get a raise or pay down other debts

Finally, don’t hesitate to consult a financial professional if your goals or risk tolerance shift. A small adjustment today can keep your retirement strategy aligned with what matters most.

Choosing a Retirement Plan Provider: 401(k) TPAs vs IRA Custodians

When it comes to retirement accounts, the provider you select can make all the difference—especially if you’re a plan sponsor responsible for compliance and fiduciary duties or an individual investor deciding where to house your Roth IRA. For businesses, a third-party administrator (TPA) ensures your 401(k) plan meets ERISA requirements, handles testing, and keeps you on the right side of the Department of Labor. For individuals, an IRA custodian safeguards your assets, offers an investment lineup, and keeps track of your contributions and distributions. Below, we’ll outline what sponsors should look for in a TPA, explain fiduciary roles, introduce Summit Consulting Group’s services, and offer criteria for choosing a Roth IRA custodian.

What Plan Sponsors Need in a 401(k) TPA

A quality TPA goes beyond basic recordkeeping. Plan sponsors should look for:

• ERISA expertise: preparation of plan documents (SPD, adoption agreement) and adherence to Title I rules
• Annual compliance testing: nondiscrimination (ADP/ACP) and coverage tests to ensure fair treatment of all employees
• Government filings: Form 5500 preparation and submission, including Schedule C disclosures
• Participant communications: timely distribution of required notices, summaries, and fee disclosures
• Ongoing support: audit assistance, contribution reconciliations, and troubleshooting plan operations

By partnering with a TPA that understands both the legal landscape and your company’s culture, sponsors can reduce risk and streamline administration.

Understanding Fiduciary Responsibilities

Under ERISA, various fiduciary roles can be assigned or outsourced:

• Section 3(16) administrator: handles day-to-day plan operations, plan document updates, participant eligibility, and government filings
• Section 3(38) investment manager: selects, monitors, and replaces investment options, relieving sponsors of liability for those decisions
• Section 402(a) named fiduciary: holds ultimate authority for plan administration and investments, often delegated to an experienced firm

Choosing to delegate these functions can shift much of the fiduciary burden away from company leadership. However, sponsors should conduct due diligence—reviewing experience, service levels, and insurance—before naming any external fiduciary.

Summit Consulting Group, LLC: 401(k) Administration & Fiduciary Services

Summit Consulting Group, LLC (also known as Admin316) offers end-to-end 401(k) administration and fiduciary services designed to reduce costs, minimize liability, and automate labor-intensive tasks:

• ERISA compliance and plan document maintenance
• Form 5500 and nondiscrimination testing handled on your behalf
• 3(16) administrative services to manage day-to-day operations
• 3(38) investment management to oversee, report on, and optimize your line-up
• Section 402(a) Named Fiduciary oversight to keep sponsors aligned with regulatory duties
• Proven cost-reduction strategies (average savings of 32%–65%) while preserving relationships with existing custodians and recordkeepers
• Automated data gathering, paperwork generation, and government form preparation

By combining independent fiduciary oversight with comprehensive support, Summit helps plan sponsors focus on their core business without sacrificing plan quality or compliance.

Selecting a Roth IRA Custodian

When you open a Roth IRA, your choice of custodian influences fees, investment options, and service levels. Consider the following factors:

• Account minimums and annual fees: some brokers require high balances, while others have no minimums and low or no maintenance fees
• Investment menu: check availability of stocks, bonds, ETFs, mutual funds, REITs, and any alternative assets you’re interested in
• Trading costs: commission-free trades versus per-transaction fees, which can add up if you’re an active trader
• User experience: ease of online account opening, mobile app quality, and access to educational tools or advisor support
• Roth conversion and in-plan rollover options: if you plan to backdoor Roth or consolidate old plans

By weighing cost against convenience and investment flexibility, you’ll find a custodian that fits your style—whether you prefer a hands-on brokerage, a low-cost robo-advisor, or a traditional bank.

Choosing the right provider—both for a 401(k) TPA and your personal Roth IRA custodian—lays the foundation for a well-managed, tax-efficient retirement strategy. With the right partners in place, plan sponsors can meet their fiduciary obligations and individual savers can grow assets with confidence.

Frequently Asked Questions: Choosing Between a 401(k) and a Roth IRA

Below are answers to common questions about these two retirement vehicles, helping you decide which account (or combination) best fits your situation.

What is better to have: a Roth IRA or a 401(k)?

There’s no one-size-fits-all answer. A traditional 401(k) offers an immediate tax deduction by reducing your taxable income today, which can be especially valuable if you’re in a high bracket now and expect a lower rate in retirement. A Roth IRA, on the other hand, locks in tax-free withdrawals down the road—ideal if you believe your future tax rate will be higher. And remember, most 401(k) plans include an employer match. Capturing that match before funding a Roth IRA ensures you’re not leaving free money on the table.

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

Yes. The IRS treats these as separate buckets, each with its own annual limit. For 2024, you can defer up to $23,000 (plus a $7,500 catch-up if you’re 50 or older) into your 401(k) and still contribute up to $7,000 (or $8,000 with catch-up) to a Roth IRA—provided you meet the Roth’s income phase-outs. Holding both accounts gives you the flexibility of pre-tax and after-tax savings, which can be a powerful way to manage your tax bill in retirement.

Which is better: maxing out a 401(k) or a Roth IRA?

Start with your 401(k) match—any employer contribution is essentially free money. Next, contribute to a Roth IRA up to its annual limit ($7,000 for 2024, plus $1,000 catch-up if you’re 50+). After that, return to your 401(k) and defer additional pre-tax dollars up to the plan max. This sequence—match, Roth, then extra 401(k)—combines the immediate tax benefits of the 401(k) with the long-term tax-free growth of a Roth IRA.

How much can you contribute to both in the same year?

For 2024, you can put up to $23,000 into a 401(k) (plus $7,500 catch-up if you’re 50+) and up to $7,000 into a Roth IRA (plus $1,000 catch-up if you’re 50+). These limits are independent, so maxing out one account doesn’t reduce what you can invest in the other. Automating your payroll deferrals and IRA transfers makes it easier to stay within these IRS limits.

Which account gives more liquidity for emergencies?

A Roth IRA wins on liquidity. You can withdraw your contributions at any time, tax- and penalty-free, without dipping into earnings. A 401(k) is more restrictive: early withdrawals before age 59½ usually carry a 10% penalty plus income tax, though some plans allow loans or hardship withdrawals under specific circumstances. If you want an added cushion for unexpected expenses, a Roth IRA can double as a backup emergency fund without derailing your retirement plan.

Taking the Next Step Toward Your Retirement Goals

You’ve seen how a traditional 401(k) can deliver an immediate tax break and how a Roth IRA locks in tax-free growth. By combining the two, you create a flexible retirement toolkit: a pre-tax bucket to lower your taxable income now and an after-tax bucket for penalty-free withdrawals later. That balance can help you manage tax brackets in retirement, access funds in an emergency, and leave a tax-efficient legacy for loved ones.

Now it’s time to translate knowledge into action. Start by reviewing your current savings:

• Check your 401(k) deferral rate and adjust it to capture the full employer match.
• Open or fund a Roth IRA up to the annual limit, if income allows.
• Automate transfers so each paycheck and pay period contributes to your long-term plan without you thinking twice.

If you’re a business owner or HR leader, remember that navigating ERISA rules and fiduciary duties doesn’t have to be a solo effort. Summit Consulting Group, LLC offers full 401(k) administration and independent fiduciary services, streamlining compliance, reducing plan costs, and handling everything from nondiscrimination testing to Form 5500 filings. Visit Summit Consulting Group to learn how our 3(16), 3(38), and 402(a) solutions can lift the administrative burden and help you focus on running your business.

Whether you’re an individual investor or a plan sponsor, taking that next step—updating your deferral elections, opening a Roth IRA, or partnering with an experienced TPA—brings you closer to a secure retirement. Small changes today can compound into a significant nest egg tomorrow. Make your move now and keep your retirement goals on track.