how is a 401 k plan different from an ira 
both 401 k plans and iras provide tax advantages to employees investing for their retirement but a 401 k plan is only available through an employer contributions are automatically deducted from the employee s paycheck some companies match part of employee contributions also 401 k plans have higher contribution limits an ira can be set up by anyone who has earned income regardless of whether they have a 401 k plan at work most 401 k plans offer a limited choice of mutual funds and exchange traded funds etfs an ira can offer a wider range of funds stocks and other securities 2425the bottom lineiras are retirement savings accounts that offer tax advantages they work a bit like a 401 k but they don t require an employer to sponsor them there are several types of iras traditional iras roth iras sep iras and simple iras there are annual income limitations on deducting contributions to traditional iras and contributing to roth iras so there is a limit on how much tax you can avoid by investing in an ira iras are meant to be long term retirement savings accounts if you take money out early you defeat that purpose by diminishing your retirement assets that s why money held in an ira usually can t be withdrawn before age 59 without incurring a hefty tax penalty of 10 of the amount withdrawn in addition to normal taxes owed 