401(k) vs IRA

What a 401(k) is designed for

A 401(k) is an employer-sponsored retirement plan. Contributions are usually made automatically from each paycheck. Many employers also add matching contributions, which can significantly boost savings over time.

What an IRA is designed for

An Individual Retirement Account (IRA) is opened independently of an employer. It allows you to choose where the account is held and how the money is invested.

How control and convenience differ

401(k)s are convenient and automatic, but investment choices are limited to what the employer offers. IRAs usually provide broader investment options and more direct control.

How contribution limits and access differ

401(k)s typically allow higher annual contributions. IRAs usually have lower limits, but may offer more flexibility depending on how they are used.

Why many people use both

Using both accounts allows people to take advantage of employer matching while also maintaining flexibility and control through an IRA. Each account plays a different role within the overall plan.

Common scenarios

Some people start with a 401(k) because of employer match. Others add an IRA to expand investment choices. Over time, many households use a combination of both to balance convenience and flexibility.