Markus Andrews

Federal student loan borrowers’ options for repaying their debt have dramatically changed over the last few months — with more shifts to come.
Here’s a breakdown of the revised repayment plans.

Bevan Goldswain | E+ | Getty Images

Several of the U.S. Department of Education’s student loan repayment plans have recently changed in major ways — and more new rules are set to go into effect in the coming months.
Plans that used to conclude in student loan forgiveness no longer do, for example, while repayment timelines are getting longer for some borrowers. The Education Department has quietly rolled out some of these developments, with descriptions of the changes on FAQs on its website.

The revisions to the plans’ terms are a result of court actions over the last year or so, as well as the passage of President Donald Trump’s “big beautiful bill” earlier this summer.
Here’s what to know about the state of repayment plan options for those with federal student loans.

SAVE

The Biden administration rolled out SAVE, or the Saving on a Valuable Education plan, in 2023, promising many borrowers that they’d see their monthly bills drop by half. Nearly 7.7 million people enrolled in SAVE, the Education Department recently said.
SAVE was a new income-driven repayment plan, also called an IDR.
Congress created the first IDR plans in the 1990s with the goal of making student loan borrowers’ bills more affordable. Historically, the plans cap people’s monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.

More from Personal Finance:Trump floats tariff ‘rebate’ for consumersStudent loan forgiveness may soon be taxed againStudent loan borrowers — how will the end of the SAVE plan impact you? Tell us
But student loan borrowers never got the promised lower payments under SAVE. Just as many of the SAVE plan’s benefits were going into effect, Republican-led legal challenges blocked the program.
Unlike the Biden administration, Trump officials have not fought in the courts to preserve SAVE, and recently, Congress repealed the plan altogether.
As a result, the SAVE plan is now essentially defunct. Borrowers who enrolled in the plan were placed in a forbearance while the legal challenges played out. While you can remain in that payment pause for now, the Trump administration started charging interest if you do so as of Aug. 1.
“Staying in a forbearance is not wise, as the interest will continue to accrue, digging the borrower into a deeper hole,” said higher education expert Mark Kantrowitz.

IBR

The best option for many borrowers looking for another affordable repayment option now that SAVE is unavailable is the Income-Based Repayment plan, or IBR, experts said. IBR is also an income-driven repayment plan.
Under the terms of IBR, borrowers pay 10% of their discretionary income each month — and that share rises to 15% for certain borrowers with older loans.
Debt forgiveness is supposed to come after 20 years or 25 years, depending on when you took out your loans. Older loans are subject to the longer timeline.
More from Personal Finance:Trump floats tariff ‘rebate’ for consumersStudent loan forgiveness may soon be taxed againStudent loan borrowers — how will the end of the SAVE plan impact you? Tell us
But there have been recent changes to IBR, too.
The Education Department said earlier this summer that it was pausing the loan discharge component on IBR while it responds to court decisions over SAVE. It said those rulings changed which periods count toward loan forgiveness on other plans, too, and that it is working to get updated eligible payment counts for IBR enrollees.
There’s another update to IBR: In the past, student loan borrowers needed to prove “partial financial hardship” to get into the plan, or income below a certain level. That requirement is now waived, the Education Department said.
However, Elaine Rubin, director of corporate communications at Edvisors, said some borrowers are not yet able to take advantage.
“While the partial financial hardship requirement for IBR was removed, borrowers are still being rejected due to their income,” Rubin. “We expect this to change, but it’s unclear when.”

ICR and PAYE

The Income-Contingent Repayment plan, or ICR, no longer concludes in student loan forgiveness, the according to the Education Department website. There is also no debt erasure benefit anymore on PAYE, or the Pay as You Earn plan.
As a result, most experts now say to avoid these plans.
There’s another reason for that, too: The latest spending bill phases out ICR and PAYE as of July 1, 2028.

RAP

Starting on July 1, 2026, millions of borrowers will have access to a new option to pay down their debt, called the Repayment Assistance Plan, or RAP. RAP is an IDR plan, but it’s different from previous ones in several ways.
For one, it doesn’t shield a portion of a borrower’s income like other IDR plans do, but rather calculates their bill based on adjusted gross income. AGI is your total earnings before taxes, minus certain deductions.
The more you earn, the bigger your required payment. Under RAP, monthly payments will typically range from 1% to 10% of your earnings.
There will be a minimum monthly payment of $10 for all borrowers. (Under other IDR plans, certain low-income borrowers were entitled to a $0 monthly payment.)

RAP leads to student loan forgiveness after 30 years, compared with the typical 20-year or 25-year timeline on other IDR plans.
Current borrowers will maintain access to some existing repayment plans, including IBR. But those who borrow after July 1, 2026 will only have two options: RAP and a tweaked Standard Repayment Plan.

Standard Repayment Plan

The current Standard Repayment Plan is fairly simple: Borrowers typically have their debt divided into fixed payments over 10 years. It’s often the fastest option for people to pay off their student debt, compared with IDR plans. 
That plan is still available and will remain available to borrowers who don’t take out any new loans after July 1, 2026.
But those who do will experience different terms.

The new Standard Repayment Plan will spread a borrower’s debt into fixed payments over one of four timeframes, depending on what they owe.
Those who’ve borrowed up to $24,999 will still have a 10-year repayment term. But those who owe between $25,000 and $49,999 will pay their debt back over 15 years; a balance ranging from $50,000 to $99,999 will be paid back over 20 years; and a debt over $100,000 will lead to a 25-year repayment term. More

President Donald Trump announced Federal Reserve Governor Lisa Cook’s removal, citing allegations of mortgage fraud made by Federal Housing Finance Agency Director Bill Pulte.
The Department of Justice has also recently targeted Sen. Adam Schiff, D-Calif., and New York Attorney General Letitia James with similar allegations.
However, owner-occupancy mortgage fraud can be difficult to prove, experts say.

Financial incentive

The main reason a borrower could be motivated to claim a primary residence on a mortgage application is to get a lower interest rate for that home.
Typically, mortgages for a primary residence have lower interest rates and homeowner’s insurance costs, said Keith Gumbinger, vice president of mortgage website HSH.
Mortgage interest rates are generally 0.5% to 1% higher for investment properties than for primary homes, according to Bankrate. Homeowners also typically pay about 25% more for insurance as a landlord compared with a standard homeowners policy, according to the Insurance Information Institute.
Owner-occupied means “you’re going to live there the majority of the time,” Gumbinger said. But there are limited exceptions, including for military service, parents providing housing for a disabled adult child or children providing housing for parents, according to Fannie Mae.
If a homeowner changes primary residences, they need to inform their mortgage lender that the original property is no longer owner-occupied, Gumbinger said.

Tax benefits

There are also federal and state tax benefits for primary residences, according to Albert Campo, a certified public accountant and president of Campo Financial Group in Manalapan, New Jersey.
For example, when an owner sells a home and makes a profit, they can take a capital gains exemption worth up to $250,000 for single filers or $500,000 for married couples filing jointly, as long as they meet certain IRS rules, including owner occupancy for two of the past five years.
For tax purposes, a homeowner can have only one primary residence at a time.
When a taxpayer owns more than one home, proving which one is the primary residence is “always based on facts and circumstances,” Campo said. For example, a primary residence is typically where an owner spends most of their time, votes, files their tax returns and receives mail, he said.

‘Difficult to detect’

A 2023 report from the Federal Reserve Bank of Philadelphia found that more than 22,000 “fraudulent borrowers” misrepresented their owner-occupancy status, out of 584,499 loans originated from 2005 to 2017. The data was based on a subsample from more than 15 million loans originated during this period.
Typically, the fraudulent borrowers took out larger loans and had higher mortgage default rates, the authors found.
However, this type of fraud may be “difficult to detect until long after the mortgage has been originated,” the authors wrote.

In the court of law, this is small ball and very difficult to prove.

Jonathan Kanter
Washington University in St. Louis law professor and former Assistant Attorney General

“There is a difference between the court of law and the court of public opinion,” Jonathan Kanter, a law professor at Washington University in St. Louis and a former assistant attorney general, told CNBC’s “Squawk Box” last week when asked about Cook. “In the court of law, this is small ball and very difficult to prove.”
“You’d have to establish not only that she filled out the form incorrectly, but she had the specific intent to deceive, to defraud banks, as opposed to just making a mistake,” he said.
During fiscal year 2024, 38 mortgage fraud offenders were sentenced in the federal system, according to the United States Sentencing Commission’s interactive data analyzer. That number is up slightly from 34 offenders in 2023, but down from 426 offenders in 2015, the earliest date in that tool’s dataset. The U.S. Sentencing Commission data does not break out the types of mortgage fraud. More

Recent changes to the federal student loan system have made it difficult for some borrowers to get accurate information on their accounts.
Experts shared tips on how to get someone on the phone who can help you with your debt.
“If your state has a Student Loan Ombudsman, consider reaching out to them for help, or to your elected officials,” said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.

Josh Harner
Courtesy: Josh Harner

A myriad of recent changes to the federal student loan system have made it difficult for some borrowers to get someone on the phone — whether from the Department of Education or their loan servicer — who can answer their questions accurately.
“You never get a straight answer,” said one student loan borrower, Josh Harner, 38.

Another borrower Dan Carrigg, 41, said, “I have been told all kinds of conflicting information.”
Both men are stuck in a more than 72,000-person backlog for a program that helps borrowers access Public Service Loan Forgiveness, and have been trying for months to get updates on their applications.
At times, some borrowers struggle to even get in touch with someone at their student loan servicer to discuss their account, said Anna Anderson, a staff attorney at the National Consumer Law Center.
“When a borrower can’t reach their servicer, they’re often stuck and can face huge financial consequences unless they are able to get additional help,” Anderson said. For example, borrowers who aren’t able to access an affordable repayment plan can become delinquent on their loans.
The issues borrowers face in obtaining accurate information on their accounts stem from a dramatic overhaul of student loan repayment plans, experts say, after recent court actions and the passage of President Donald Trump’s “big beautiful bill.” 

The U.S. Department of Education did not respond to a request for comment. Neither did the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
Here’s what to know about getting assistance with your debt.

How to reach someone about your student loans

There are two ways of contacting someone about your federal student loan account, said higher education expert Mark Kantrowitz.
The first is with the U.S. Department of Education, at the Federal Student Aid Information Center. To reach the center, you call 1-800-4FED-AID, or 1-800-433-3243. To avoid the longest wait times, Kantrowitz recommends calling early — around 8 a.m. — on a weekday morning.
If you run into any trouble, FSA also has a live chat option on its website, Kantrowitz added.
Student loan borrowers can also look at this list of call centers at Studentaid.gov, to try and find the support most relevant to their issue, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that helps borrowers navigate the repayment of their debt.
For example, you’ll call a different phone number if you’re trying to get out of default versus if you’re trying to learn about a loan forgiveness program.
More from Personal Finance:Trump floats tariff ‘rebate’ for consumersStudent loan forgiveness may soon be taxed againStudent loan borrowers — how will the end of the SAVE plan impact you? Tell us
The other option is to contact your student loan servicer. This will be the best bet for people who are trying to navigate repayment, Mayotte said. If you don’t know which company is managing your student loans on behalf of the Education Department, you can find out at Studentaid.gov.
“A borrower is going to get much more current account information from their servicers,” she said.
If you’re dealing with long hold times with your servicer, “the only thing they can do is wait, try again during a different time, or consider sending an email instead,” Mayotte said.
For the best chance of reaching someone quickly, she also recommends calling your loan servicer as soon as their customer service center opens.
Kantrowitz suggests waiting on the phone, and declining any offer to be called back: “They never call back at a convenient time, if they call back at all.”

When you’re getting nowhere

If you’re not able to get the right (or any) information from the Education Department or your loan servicer, there are a number of other parties you can turn to instead, consumer advocates said.

Look for organizations and nonprofits in your area that help people with student loan-related issues. For example, in New York, there’s the Education Debt Consumer Assistance Program.
Borrowers may also be able to access free advice from The Institute of Student Loan Advisors, a nonprofit offering advice and dispute resolution assistance.
“If your state has a Student Loan Ombudsman, consider reaching out to them for help, or to your elected officials,” said Nancy Nierman, assistant director of the EDCAP in New York.
There are also many steps you can take on your own at Studentaid.gov, Kantrowitz pointed out. You can apply for different repayment plans as well as a mix of loan forgiveness programs.
You should also monitor StudentAid.gov and your loan servicer’s website for updates, said Jaylon Herbin, director of federal campaigns at the Center for Responsible Lending.
“Be wary of conflicting information, as even official sources have provided inconsistent guidance during recent transitions,” Herbin said.

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President Donald Trump’s “big beautiful bill” temporarily increased the SALT deduction cap from $10,000 to $40,000 starting in 2025.
The $40,000 SALT deduction limit starts to decrease once modified adjusted gross income exceeds $500,000, and phases out completely to $10,000 when MAGI reaches $600,000.
Since Roth conversions trigger extra income, the strategy could threaten the tax break for some higher earners, experts say.

U.S. President Donald Trump signs the sweeping spending and tax legislation, known as the “One Big Beautiful Bill Act,” at the White House in Washington, D.C., U.S., July 4, 2025.
Ken Cedeno | Reuters

Roth individual retirement account conversions have become a popular way for investors to reduce lifetime taxes. But for some high earners, the strategy could hurt eligibility for the state and local tax deduction, known as SALT.
President Donald Trump’s “big beautiful bill” temporarily increased the SALT deduction cap from $10,000 to $40,000 starting in 2025. The limit increases by 1% yearly through 2029 and reverts to $10,000 in 2030.

Roth conversions transfer pretax or nondeductible IRA funds to a Roth IRA, which kickstarts future tax-free growth. The trade-off is incurring regular income during the year of conversion.
Extra income can impact tax breaks — including the $40,000 SALT cap — due to phaseouts, or benefit reductions, once earnings exceed certain thresholds, experts say.
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The $40,000 SALT deduction limit starts to decrease once modified adjusted gross income exceeds $500,000, and phases out completely to $10,000 when MAGI reaches $600,000.
That creates what some tax experts are calling a “SALT torpedo,” or artificially higher tax rate of 45.5%, between those earnings thresholds.

If you’re making Roth conversions with income near that range, the phaseout could create a “tax bomb,” said certified financial planner Kevin Brady, senior vice president at Wealthspire Advisors in New York.

How the SALT deduction works

Taxpayers claim the greater of the standard deduction or itemized tax breaks on returns every year. If you itemize, you can claim up to $40,000 for SALT in 2025, which includes state and local income and property taxes.
However, the vast majority of filers — roughly 90%, according to the latest IRS data — use the standard deduction and don’t benefit from itemized tax breaks.
Raising the SALT deduction cap is expected to primarily benefit higher earners, according to a May analysis from the Tax Foundation. 
The change “helps some high-tax-state clients, but it also phases out at higher incomes,” said Jared Gagne, a CFP with Claro Advisors in Boston.

There are several factors to consider when making Roth conversions, including long-term financial and legacy planning goals, experts say.
When making Roth conversions, Gagne weighs clients’ current tax brackets and other deduction phaseouts. He also considers income-related monthly adjustment amounts, or IRMAA, for Medicare Part B and Part D premiums, along with the earnings thresholds for net investment income tax. 
Plus, the goal of Roth conversions is to reduce your lifetime taxes. In many cases, advisors run multi-year projections to decide whether it makes sense to forgo a current-year tax break to secure long-term tax-free growth.  More

Singer Taylor Swift and football player Travis Kelce announced their engagement on Tuesday afternoon.
The news lifted shares of Signet Jewelers briefly.

US singer-songwriter Taylor Swift kisses Kansas City Chiefs’ tight end #87 Travis Kelce after the Chiefs won Super Bowl LVIII against the San Francisco 49ers at Allegiant Stadium in Las Vegas, Nevada, February 11, 2024. 
Patrick T. Fallon | Afp | Getty Images

Your favorite post-pandemic economic engine shared some personal news on Tuesday.
Singer Taylor Swift announced her engagement to Kansas City Chiefs tight end Travis Kelce via social media. The pair’s afternoon post included pictures featuring an engagement ring that has been described as “cushion cut.”

Shares of Signet Jewelers, one of the few jewelers that trades on major exchanges, spiked immediately following the announcement. The stock chart shows a pop shortly after 1 p.m. ET correlated to the post, which has racked up 16 million likes and more than 600,000 reshares as of Tuesday afternoon.
The stock rose more than 3% in the session, presumably on a potential influx of Swifties looking for unique rings to mark their matrimony.

Stock chart icon

Signet, 1-day

Fans rushed to figure out the ring type following the post. Brides.com quoted one industry professional labeling the diamond as cushion cut.
This isn’t the first time that the “Fearless” singer’s actions have caught the attention of the business and finance world. Swift’s world tour caused a consumer spending bump that was documented by Wall Street analysts and the Federal Reserve.
The “Eras” tour was viewed as boon for hotels and other businesses located near stops during its run from mid 2023 through late 2024. The tour got a nod in a 2023 edition of the Fed’s “Beige Book,” which chronicles trends in regional business activity across the U.S.
Earlier this month, the 14-time Grammy winner displayed her influence once again. After announcing her next album, “The Life of a Showgirl,” well-known consumer brands and professional sports teams raced the match the orange-focused aesthetic. More

ETF Strategist

ETF Street
ETF Strategist

Berkshire Hathaway Chairman Warren Buffett or Vanguard founder Jack Bogle have both said a long-term investment strategy in the S&P 500 index can reap big gains.
Yet that “set-it-and-forget-it” approach may no longer work for today’s investors, particularly if they have a shorter time horizon, according to Morgan Stanley.
While the index is up year to date, here’s why some experts say it may be time to diversify.

A small replica of the Charging Bull statue is seen on a street vendor stall outside the New York Stock Exchange on July 11, 2025.
Jeenah Moon | Reuters

The S&P 500 index has bounced back from its April lows.
Yet experts say investors would be wise to watch the risks before pursuing an investment strategy concentrated in the large-cap company-focused S&P 500 index, which represents about 80% of market capitalization.

“Our advice for people who are looking at their performance on a one-year or three-year horizon is no, we don’t think that the set-it-and-forget-it, S&P 500-only strategy is the right strategy,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

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Here’s a look at other stories offering insight on ETFs for investors.

Yet that doesn’t mean the long-run index investing strategy famously touted by Berkshire Hathaway Chairman Warren Buffett or Vanguard founder Jack Bogle is no longer a good strategy, according to Shalett.
Those investors may put the S&P 500 in their 401(k) and not look at it for 30 years.
The problem is that most humans are highly sensitive to losses and check their accounts frequently, which makes it difficult not to touch their investments for decades, she said.
“That’s not how most human beings actually invest,” Shalett said.

‘You’re buying tech and AI’

Having an investment strategy concentrated in the S&P 500 index is also problematic now for another reason.
The S&P 500 had a good second quarter, where profits and margins in aggregate expanded, Shalett said.
But the Magnificent Seven — technology stocks including Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla — represented 26% of the earnings growth, she said. Meanwhile, 493 companies had 3% profit growth.
“That’s not a healthy market,” Shalett said. “That’s a very narrow market.”

When looking at the S&P today, it’s important to realize that what you’re buying now, versus what you were buying 10 years ago, has changed, said John Mullen, managing director and president at Parsons Capital Management.
The top 10 holdings currently represent approximately 40% of the index.
“If you’re buying the S&P, to a large extent, you’re buying these 10 names and, even more so, you’re buying tech and AI,” Mullen said.
The only top 10 exception that’s not a tech or artificial intelligence-related play is Berkshire Hathaway, he said.

What generative AI means for the market

For the top 10 company names in the market, the potential for generative AI is in the “sixth or seventh inning of being fully priced,” Shalett said.
Consequently, Morgan Stanley is looking to untapped opportunities where productivity can benefit from generative AI, such as in business services, financials and health care, she said.
“We’d much rather be in those places where the potential for the Gen AI story to be an upside surprise,” Shalett said.
Morgan Stanley is encouraging clients to be active stock pickers, according to Shalett.
Today’s investors may take another cue tied to Buffett, she said. In June, Berkshire Hathaway bought a $1.6 billion stake in health insurance company UnitedHealth.
The bet shows the belief in an upside margin potential in generative AI in the insurance industry, which is a highly manual, bureaucratic industry that is likely to be transformed, she said.

Where to look to diversify

Megacap stocks may continue to perform well from here, according to Joseph Veranth, chief investment officer of Dana Investment Advisors. The firm ranked No. 4 on the 2024 CNBC Financial Advisor 100 list.
But for investors who hold the S&P 500 or ETFS that are concentrated in the biggest stocks in that index, their concentration has increased as those companies have outperformed, unless they have rebalanced, Veranth said.
Consequently, it may make sense now to adjust those holdings to include smaller stocks, he said.
Morgan Stanley is also encouraging clients to diversify into other sectors and to look to international and emerging markets for opportunities, according to Shalett. The firm is also pointing investors to the equal-weight index for the S&P 500, where each company represents the same percentage.
An equal-weight index is the easiest way to diversify, Mullen said. But investors may also consider factor ETFs that put caps on weightings or emphasize certain sectors, he said. Or they may diversify into mid-cap, small-cap or the Russell 1000, which tracks the highest ranking 1,000 stocks in the Russell 3000 index, he said. More

For 2025, you qualify for the 0% long-term capital gains rate if your taxable income is $48,350 or less for single filers, or $96,700 or less for married couples filing jointly.
But new tax breaks under President Donald Trump’s “big beautiful bill” could expand eligibility by reducing taxable income for some investors.
You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

dowell | Moment | Getty Images

With the stock market hovering near record highs, you may have large profits sitting in a taxable brokerage account. 
Upon selling, you could owe capital gains taxes, levied at 0%, 15% or 20%, based on taxable income, if you own the assets for more than one year. There’s also a 3.8% surcharge for higher earners, which could bring the total rate to 23.8%.

But many investors don’t realize they qualify for 0% capital gains, which is a chance to take some profits without triggering a tax bill. 
“I’d say probably half of our clients are aware of it and understand the concept,” said certified financial planner Andrew Herzog, associate wealth manager at The Watchman Group in Plano, Texas.
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President Donald Trump’s “big beautiful bill” didn’t change the capital gains rates. But new deductions could reduce taxable income for 2025, which could expand eligibility for the 0% bracket, experts say.
Here’s what investors need to know about the 0% long-term capital gains brackets for 2025.

Who is in the 0% capital gains bracket in 2025

For 2025, you qualify for the 0% long-term capital gains rate if your taxable income is $48,350 or less for single filers, or $96,700 or less for married couples filing jointly.
But many investors don’t realize there’s a big difference between gross earnings and taxable income. That gap could be even wider under Trump’s new spending package, said Tommy Lucas, a CFP at Moisand Fitzgerald Tamayo in Orlando, Florida.

You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
Trump’s legislation increased the standard deduction from $15,000 to $15,750 for single filers and $30,000 to $31,500 for 2025.
For example, if a married couple filing jointly earns $120,000, and you subtract the $31,500 standard deduction, their taxable income is $88,500. That leaves room to harvest gains at 0% before hitting the $96,700 limit. 

A ‘game-changer’ for older investors

Trump’s law also added a temporary $6,000 tax break ($12,000 for married couples) for older Americans ages 65 and over. The benefit falls once modified adjusted gross income exceeds $75,000 for single filers or $150,000 for married filing jointly.
The new tax break is on top of the regular standard deduction, plus the extra deductions for Americans who are ages 65 and over or blind.
“That’s going to be a game-changer” for married couples who qualify for the $12,000 deduction because it further reduces taxable income, Lucas said.
It’s a “golden opportunity” to sell some assets at 0% capital gains, or other tax strategies, he said.

Investors can also use the 0% capital gains bracket to “reset their cost basis,” or the asset’s original purchase price, which can reduce future taxes, Herzog said.
You can sell an asset tax-free, “and then just buy it right back,” to set the new basis, he said. More

Roth 401(k) and Roth IRA contributions occur on an after-tax basis. You can withdraw Roth funds tax-free in retirement.
The original account owner also avoids future required withdrawals, which permits further compound growth.
But when comparing Roth 401(k) versus Roth IRA deposits, there are pros and cons to consider, experts say.

Laylabird | E+ | Getty Images

Roth 401(k) or Roth individual retirement account contributions can be a powerful way to build wealth for your golden years.
There’s no upfront deduction for deposits with either, but the investment grows tax-free, which means you won’t owe taxes on withdrawals in retirement. Plus, there are no required withdrawals for the original account owner.

But when comparing Roth 401(k) versus Roth IRA contributions, there are pros and cons to consider, experts say.
“It’s power versus freedom,” said certified financial planner Jordan Whitledge, lead advisor at Donaldson Capital Management in Evansville, Indiana. 
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While you can defer more into your Roth 401(k), there could be more flexibility with your Roth IRA account, Whitledge said.”The mistake is thinking it’s one or the other,” because you can contribute to both accounts, he said.
Still, there are key differences between Roth 401(k) and Roth IRA accounts, experts say. Here’s what to know.

Your Roth 401(k) offers ‘free money’

When you make Roth 401(k) contributions, you typically receive an employer match, up to a certain percentage of your deferrals. The match could be deposited into your pretax or Roth account, depending on the plan.
That’s “essentially free money,” said CFP Nathan Sebesta, owner of Access Wealth Strategies in Artesia, New Mexico.
Typically, experts say you should contribute at least up to your 401(k) match before considering savings into other accounts.
The trade-off is that 401(k)s typically have fewer investment choices and higher plan fees in some cases compared with your Roth IRA, Sebesta said.

Defer a ‘much higher amount’

Another benefit of Roth 401(k) contributions: There’s no income limit, and you have a bigger deferral cap compared with your Roth IRA, according to Whitledge. 
“It really comes down to the ability to save a much higher amount,” he said.
For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you’re age 50 and older, known as “catch-up contributions.” That catch-up limit is $11,250 for workers aged 60 to 63 in 2025, which brings the max deferral cap to $34,750 for these investors.
By comparison, the Roth IRA contribution limit for 2025 is $7,000, plus an extra $1,000 for investors age 50 and older.
There are also income limits for Roth IRA contributions, which adjust yearly for inflation. But higher earners can bypass the cap via the so-called backdoor Roth strategy.

Your Roth IRA offers flexibility

One of the biggest benefits of Roth IRAs is flexibility, experts say.
You can withdraw Roth IRA contributions — but not growth — anytime without paying an IRS penalty. Generally, earnings withdrawn before age 59½ are subject to a 10% penalty, with some exceptions.
By contrast, you can only tap your 401(k) penalty-free under certain scenarios, assuming your plan allows it. You may also have access to limited 401(k) loans, which come with specific payback guidelines.
“You can’t necessarily take contributions out of the Roth 401(k),” said Whitledge. “That’s why you’re able to compound a lot more, a lot quicker.”

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