Final answer:
Roth IRA accounts feature tax-free growth and withdrawals, contrasting with traditional IRAs, which have tax-deferred growth but taxed withdrawals. Both are similar in that they have annual contribution limits and withdrawal rules. 401(k) and 403(b) plans also offer tax-deferred growth with employer contributions and employee paycheck deductions.
Step-by-step explanation:
The distribution rules for Roth IRA accounts are similar to the rules for traditional IRA accounts. While traditional IRAs offer tax benefits upfront as contributions are made with pretax dollars, the distributions upon withdrawal are subject to taxes. Conversely, Roth IRAs are funded with after-tax dollars, meaning the growth and withdrawals are tax-free. With both types of IRAs, there are annual contribution limits and rules regarding withdrawals to encourage long-term savings for retirement.
Another key element of retirement planning involves 401(k) and 403(b) plans. These are also tax-deferred retirement savings plans, with contributions made directly from an employee's paycheck on a pretax basis. Unlike traditional pensions, these defined contribution plans are portable and can move with an employee from one job to another.