Comparison Chart

Tax Year 2009	401(k)	Roth 401(k)	Traditional IRA	Roth IRA
Tax Implications	Contributions are deposited as "tax deferred" and then taxed at normal income bracket for distributions	Contributions are post tax money and no taxes have to be paid under normal distributions	Contributed money is at first post tax money. However, contributions are tax deductible which reduce your tax basis for that tax year. Then, distributions are taxed at the normal income for distributions. Tax deductibility is limited by MAGI and participation in pension or 401k.	Contributions are post tax money and no taxes have to be paid under normal distributions
Income Limits	Generally none, but somewhat complicated due to HCE (highly compensated employees) rules		Based upon MAGI; Single, HoH, MFS: full contrib to $53k, partial to $63k; MFJ; QW: full contrib to $85k, partial to $105k; can't contribute more than you make in that year	Based upon MAGI; Single: full contrib up to $105k, partial contrib to $120k; Married: full contrib up to $166k, partial contrib to $176k; can't contribute more than you make in that year
Contribution Limits	$16.5k/yr for under 50, $22k/yr for 50 and over in 2009; limits are a total of traditional 401(k) and Roth 401(k) contributions. Employee and employer combined contributions must be lesser of 100% of employee's salary or $46k.		$5k/yr for age 49 or below; $6k/yr for age 50 or above in 2009; limits are total for traditional IRA and Roth IRA contributions combined
Employer or Individual	Employer sets up this plan		Individual sets up this plan
Matching Contributions	Matching contributions available from employers.	Matching contributions available through employers, but they must sit in a pretax account	No matching contributions available
Distributions	Distributions can begin at age 59 1/2 or if owner becomes disabled	Distributions can begin at age 59 1/2 and the account has been open for at least 5 years; there are exceptions though; or if owner becomes disabled	Distributions can begin at age 59 1/2 or if owner becomes disabled	Distributions can begin at age 59 1/2 as long as contributions are "seasoned" (been in the account for at least 5 years) or owner becomes disabled
Forced Distributions	Must start withdrawing funds at age 70 1/2 unless employee is still employed. Penalty is 50% of minimum distribution.	Must start withdrawing funds at age 70 1/2 unless employee is still employed unless still working and not a 5% owner. Penalty is 50% of minimum distribution.	Must start withdrawing funds at age 70 1/2. Penalty is 50% of minimum distribution.	None. This is a huge advantage for Roth IRAs within estate planning.
Withdrawal of Contributions (Principal)	No, but loans from this plan are available depending upon employer's plan	Yes, as long as the account has been open for more than 5 years, however the proportion of withdrawal equal to the proportion of profits to contributions in the account is subject to 10% penalty plus taxes	No	At any point, the owner may withdraw the total contributed into the IRA
Early Withdrawal	10% penalty plus taxes including withdrawal for hardships	Proportion of withdrawal equal to the to proportion of profits to contributions in the account is subject to 10% penalty plus taxes including withdrawal for hardships	10% penalty plus taxes for distributions before age 59 1/2 with exceptions	Early withdrawal that is more than contributions plus seasoned conversions are subject to normal income taxes and 10% penalty if not qualified distributions
Home Down Payment	Purchase of primary residence and avoidance of foreclosure or eviction of primary residence is subject to 10% penalty.	none	Can withdraw up to $10k for a first time home purchase down payment with stipulations	Up to $10k can be used for primary home down payment. Must not have owned a home in previous 24 months. House must be owned by IRA owner or direct linear ancestors or descendants.
Education Expenses	Payment of secondary educational expenses in last 12 months for employee, spouse, or dependents subject to 10% penalty		Can withdraw for qualified higher education expenses of owner, children, and grandchildren
Medical Expenses	Medical expenses not covered by insurance for employee, spouse, or dependents subject to 10% penalty		Can withdraw for qualified unreimbursed medical expenses that are more than 7.5% of AGI; medical insurance during period of unemployment; during disability
Conversions	Upon termination of employment, can be rolled to IRA or Roth IRA. When rolled to a Roth IRA taxes need to be paid during the year of the conversion.	Cannot be converted to a traditional 401(k), but upon termination of employment, can be rolled into Roth IRA	Can be converted to a Roth IRA. Taxes need to be paid during the year of the conversion. Other limitations though.
Changing Institutions	Can roll over to another employer's 401(k) plan or to a traditional IRA at an independent institution.	Can roll over to another employer's Roth 401(k) plan or to a Roth IRA at an independent institution.	Funds can be either transferred to another institution or they can be sent to the owner of the IRA who has 60 days to put the money in another institution in a rollover contribution to another traditional IRA^[4]	Funds can be either transferred to another institution or they can be sent to the owner of the Roth IRA who has 60 days to put the money in another institution in a rollover contribution to another Roth IRA^[4]
Inside The Account	Capital gains, dividends, and interest within account incur no tax liability
Beneficiaries			When owner dies, spouse as beneficiary can roll both accounts into one IRA account. Other beneficiaries will be subject to forced distributions (taxable) based on life expectancy. Beneficiaries will not pay estate tax if the inheritance is under the exemption amount.	When owner dies, spouse as beneficiary can roll both accounts into one Roth IRA account. Other beneficiaries will be subject to forced distributions (tax free) based on life expectancy. Beneficiaries will not pay estate tax if the inheritance is under the exemption amount.