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If your company offers a 401(k), does it make sense to have a Roth IRA, too?

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Roth IRAs and 401(k) plans are essential tools for building up your retirement savings.

They're both tax-advantaged, which means they are designed to minimize a person's tax burden (aka the amount you owe the IRS at the end of the year). They also offer some of the simplest and quickest ways to diversify your investments and grow your money for use later in life.

But if your company already offers a 401(k), should you have a Roth IRA, too?

CNBC Make It spoke to personal finance expert about the differences between a 401(k) and Roth IRA to help you understand which might best suit your lifestyle and retirement savings goals, and whether contributing to both is worth it.

How does a 401(k) work?

While both accounts are tax-advantaged and intended to help individuals save for retirement, there are some big differences between them.

A 401(k) is employer-sponsored, which means you can only open an account if it's offered by the company you work for. You typically can't sign up for one independently. Any contributions to a 401(k) account are made using pretax dollars that come straight out of your paycheck.

With a 401(k), or other employer-sponsored account like a 403(b), you don't pay taxes on the money until you begin taking out distributions for retirement. How much that money gets taxed depends on the tax bracket you're in at the time of the withdrawal, and pulling from your 401(k) prior to the age of 59½ could result in a penalty.

A major perk with 401(k) plans is that employers often offer a "contribution match." This is also sometimes referred to as an "employer match" or "company match," but typically it means your company contributes the same amount to your 401(k) as you do, up to a certain percent.

For example, if you earn $55,000 a year plus a 4% match, you'll need to contribute 4% (or $2,200 a year) in order to get the full employer match of $2,200. If you only put in $1,000, your employer will as well, which means you're missing out on $1,200 of essentially free money that could be growing in the market.

In the U.S., the average company 401(k) match is 4.7%, according to retirement plan provider Fidelity.

There is a limit to how much employees can invest in their 401(k). In 2019, the contribution limit is $19,000.

How does a Roth IRA work?

Roth IRAs are individually-owned retirement funds that anyone can open as long as they meet the income requirements. In 2019, single individuals making $122,000 or less can contribute to a Roth IRA. However, if they make $137,000 or more, they cannot contribute at all. A reduced contribution rate applies if they make more than $122,000 but less than $137,000. Couples who file jointly can't contribute if they make more than $193,000 combined. (For more details on the income requirements, check out the IRS website.)

Like a 401(k), there are limits to how much you can invest annually in your Roth IRA. You cannot contribute more than your taxable compensation for the year, and the maximum contribution for 2019 is $6,000; if you're age 50 or over, it's $7,000. And whether you can put in the full amount depends on your tax filing status and how much you earn annually.

Roth IRA contributions are made using after-tax dollars and, as a result, are not taxed when you withdraw the money, as long as your account has been active for five years.

While you can withdraw any Roth IRA contributions at any time, regardless of the reason, without receiving a penalty, you will be penalized if you withdraw any investment earnings from your Roth IRA prior to the age of 59½, unless it's for a qualifying reason.

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The benefits of having both a 401(k) and Roth IRA

"A traditional 401(k) has pretax contributions and Roth IRAs have 'post-tax,'" Ryan Marshall, a New Jersey-based certified financial planner, tells CNBC Make It. "If you make a $75,000 salary and contribute $5,000 to a traditional 401(k), your taxable income for that year is reduced to $70,000. On the other hand, if you contribute $5,000 to a Roth IRA and nothing to a traditional 401(k), then you have a taxable income of $75,000."

The investment growth for both 401(k)s and Roth IRAs is tax-deferred until retirement. This is a good thing for most participants since people tend to enter into a lower tax bracket once they retire, which can lead to substantial tax savings.

Deciding whether to open a Roth IRA account, especially if your company already offers a 401(k) plan, comes down to your individual circumstances. In many cases, it's smart to have both, experts say.

You're going to want flexibility in retirement, especially since no one can predict what tax rates will be in the future, how your health will fare or how the stock market will behave, Marshall says. "By having multiple buckets of money in diversified retirement funds, such as a Roth IRA and 401(k), you'll have more flexibility when facing unknowns," he adds.

Incorporating more flexibility into your savings strategy "can lead to more tax-efficient withdrawals in retirement," Marshall says. For example, a 401(k) balance of $1 million will only be worth about $760,000 to $880,000, depending on your federal tax bracket, Marshall explains. "That's because lump sum 401(k) withdrawals are typically taxed at 22% or 24%, and once you add in state tax, you could be looking at 30% going to taxes," Marshall says.

Should unexpected expenses pop up during retirement, causing you to pull from your 401(k), the lump sum you'd need to withdraw would be heavily taxed. By contrast, if you also had money invested in a Roth IRA, you could set up your withdrawal strategy differently to "achieve optimal tax efficiency," Marshall says.

Another potential downside of 401(k) plans is that participants are required to begin taking withdrawals, also known as required minimum distributions (RMD), at 70½, in order to pay back tax money that's owed to the IRS. With Roth IRAs, there is no such rule.

Unlike 401(k)s, you aren't required to withdraw from Roth IRA accounts by a certain age. That means, even if your investments tank, you may still have time to either reinvest the funds or allow them to recover with the market.

"This is an area most young people don't consider," Marshall says. "We have seen a lot of clients who are withdrawing more from their 401(k) account than they actually need to live on in retirement. The Roth IRA currently does not force you to withdraw funds and continues to grow tax-free so long as you leave money invested."

But if you only have a limited amount of money to invest and are weighing your options, it's important not to forget your employer's match. This is "free money" that helps your account to grow.

Marshall says he prefers to see clients with different kinds of accounts, such as Roth IRAs, 401(k)s, traditional IRA accounts and brokerage accounts.

"While we can try to plan for different life events, things don't always work out the way we predict," he explains. "When you add in changes to our tax laws or to Social Security options, it is almost impossible to foresee how the future will look in 20 years from now."

To learn more about Roth IRAs, 401(k)s and retirement savings, check out the following:

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