What is the difference between a 401 and an IRA?

Answer by  tamarawilhite (17883)

A 401K is funded with pre-tax money, and it is taxed as income when pulled out of the retirement account. A Roth IRA is funded with post-tax money (money that has already had income tax paid on it), but no income tax is owed on the money when it is pulled out for retirement.

Answer by  technogeek (6640)

A 401-K is where an employee contributes to a retirement account and the employer matches a percentage of the employee's contributions with contributions of their own. An IRA account is one that is opened individually by a person with their bank. There are no matching funds and the employer plays no part in it.

Answer by  npatin44 (258)

Both are retirement plans with the 401k being company sponsored as part of a compensation package, while an IRA is owned and financed solely by the owner or individual.

Answer by  dolphin9 (195)

A 401K is associated with your employer, and often your employer will provide some type of matching contibution. A 401K has a variety of investment options, including stocks. An IRA is an individual retirement account, contributions made entirely by the individual. An IRA generally earns interest in a more steady, less-risk rate.

Answer by  ApprenticeJenn (959)

Any individual can open an IRA with a bank or brokerage house and save money for retirement. A 401(k) is a sponsored retirement plan, usually by an employer, and only available to employees. It is also tax deferred. Both offer a variety of investment options. ROTH IRA's are post-tax plans.