{"id":937462,"date":"2026-10-18T09:30:22","date_gmt":"2026-10-18T09:30:22","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/937462\/"},"modified":"2026-10-18T09:30:22","modified_gmt":"2026-10-18T09:30:22","slug":"savings-challenge-roth-ira-or-457b-which-account-is-better-for-your-retirement-savings","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/937462\/","title":{"rendered":"Savings Challenge: Roth IRA or 457(b)? Which account is better for your retirement savings"},"content":{"rendered":"

\n EDITOR\u2019S NOTE:\u00a0 This story was originally featured in the Savings Challenge newsletter, which you can sign up for here<\/a>. The weekly newsletter offers readers savings tips, expert answers to your questions and weekly challenges to help boost savings. <\/p>\n

If you\u2019d like to have your savings question answered by our experts, please send it to savingschallenge@cnn.com.\n<\/p>\n

\n Sometimes, the problem with savings is less about where to get the money than which savings vehicle to put them in, since they each have their own advantages and disadvantages.\n <\/p>\n

\n In this week\u2019s Ask the Expert for CNN\u2019s Savings Challenge, Douglas Boneparth, certified financial planner and founder of Bone Fide Wealth, breaks down the differences between a Roth IRA and a 457(b), which is offered to employees of some state and local governments and tax-exempt organizations.\n <\/p>\n

\n A reader from Florida asks: \u201cI am skeptical of the future conditions of the economy and the status of Social Security. Where should I focus first for investing and saving for retirement? Roth or 457(b)? I often hear: do both, balance them out; but I am specifically asking which to maximize first. And if you have an explanation as to why, that would be very helpful.\u201d\n <\/p>\n

\n DOUG: I love this question because you\u2019re not asking whether to save for retirement. You already know you should. You\u2019re asking how to do it smarter. That\u2019s a much better conversation to be having.\n <\/p>\n

\n The 457(b) is an underrated account, especially for public employees. Unlike a 401(k), there\u2019s no 10% early withdrawal penalty, meaning you can tap it before age 59\u00bd without penalty. If early retirement is part of the plan, that matters a lot. Contributions also reduce your taxable income today, which is valuable if you\u2019re in a higher bracket now.\n <\/p>\n

\"Douglas<\/p>\n

\n However, the Roth is powered by something the 457(b) can\u2019t match: tax-free growth and tax-free withdrawals in retirement. You pay taxes now and you never pay taxes on that money again. And here\u2019s where your Social Security concern gets interesting. Roth withdrawals don\u2019t count toward the income thresholds that determine how much of your benefit gets taxed. If benefits shrink or get taxed more aggressively down the road (which is a legitimate concern) having a tax-free income source gives you flexibility a pre-tax account simply can\u2019t.\n <\/p>\n

\n If your 457(b) has an employer match, grab it first. But if you\u2019re forced to prioritize one, go with the Roth. Tax-free income in retirement is one of the most powerful tools available to today\u2019s savers. And given your skepticism about Social Security, you might sleep better at night knowing you had that tax-free bucket to draw from.\n <\/p>\n

\n Have your own savings question for Doug? Please send it to savingschallenge@cnn.com.\n <\/p>\n

\n Consistently saving and investing even small amounts of money can grow into an impressive nest egg over time.\n <\/p>\n

\n For example, if you consistently save $200 a month ($2,400 a year) from ages 25 to 65 in a pre-tax account like a 401(k), 403(b) or deductible IRA, you could have a $512,000 nest egg by age 65, according to the Plan Sponsor Council of America. That assumes an average annual return of 7%.\n <\/p>\n

\n If you can only salt away $100 a month ($1,200 a year pre-tax), but your employer offers a dollar-for-dollar match on that amount, you still can end up with half a million dollars after 40 years.\n <\/p>\n

\n And if you\u2019re able to save $200 after-tax in a Roth IRA, you will have half a million dollars tax-free when you retire.\n <\/p>\n","protected":false},"excerpt":{"rendered":"EDITOR\u2019S NOTE:\u00a0 This story was originally featured in the Savings Challenge newsletter, which you can sign up for…\n","protected":false},"author":2,"featured_media":937463,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":["post-937462","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-ca","tag-canada","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/937462","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=937462"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/937462\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/937463"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=937462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=937462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=937462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}