Only one savings plan gives you the chance to free yourself from taxes in retirement. Are you making the most of it?
With any retirement account, you must clear some hurdles to get at your money. By those standards, Roth withdrawal rules aren't draconian. In fact, you can take out your Roth IRA contributions at any time without paying taxes or a 10% early-withdrawal penalty. You can withdraw your Roth earnings without taxes or penalty as long as you're 591/2 or older and you've had a Roth IRA for at least five years. The rules for a Roth 401(k) are similar, but as a practical matter you can't touch your money until you leave your job.
What if you need the cash sooner? Once you've had a Roth IRA for five years, you can withdraw your earnings without paying taxes or a penalty if you become disabled or are buying your first home ($10,000 max); you can also take out money penalty-free for certain education costs, though you will owe taxes on your gains. A Roth 401(k) allows for tax and penalty-free withdrawals for disability only.