How does a Roth IRA differ from a Roth 401(k) in terms of contribution limits and employer involvement?

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Multiple Choice

How does a Roth IRA differ from a Roth 401(k) in terms of contribution limits and employer involvement?

Explanation:
The main idea is how much you can contribute and who administers the plan. A Roth IRA is an individual account you open with a custodian; contributions are after-tax and the yearly limit is relatively small, with no involvement from an employer. A Roth 401(k) is part of an employer-sponsored plan, and you contribute through payroll deductions with a much higher overall limit, plus the possibility of employer contributions. So describing the Roth IRA as having lower contribution limits and no employer involvement matches how these accounts actually operate. The other statements misstate which plan is employer-sponsored or the relative contribution limits.

The main idea is how much you can contribute and who administers the plan. A Roth IRA is an individual account you open with a custodian; contributions are after-tax and the yearly limit is relatively small, with no involvement from an employer. A Roth 401(k) is part of an employer-sponsored plan, and you contribute through payroll deductions with a much higher overall limit, plus the possibility of employer contributions. So describing the Roth IRA as having lower contribution limits and no employer involvement matches how these accounts actually operate. The other statements misstate which plan is employer-sponsored or the relative contribution limits.

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