Asked by Michael Morrison on Jul 02, 2024

What is the difference between an IRA and a 401k?

IRA

An Individual Retirement Account, a saving tool that allows individuals to set aside money for retirement with tax advantages.

401k

A retirement savings plan that is sponsored and set up by an employer for its employees; like other retirement plans, there are strict rules as to when the money can be withdrawn without a penalty and strict contribution limits which change from year to year.

  • Distinguish between Individual Retirement Accounts (IRA) and 401(k) plans, focusing on their respective tax consequences.