The 401(K) and Individual Retirement Accounts (IRAs) are two important methods with which Individuals can save for their retirement. The former is offered through employers, while individuals open the latter through a bank or broker. An employee can have both an IRA and a 401(k)

With 401(k), employers provide their employees with a tax advantage that helps them to save and prepare for retirement. While the employer may provide matching contributions up to an amount, the employees must contribute a stipulated percentage of their salary. Similarly, with the IRA, the employee contributes a particular percentage of their income to the account. However, the IRA does not require the employer to make matching contributions.

The 401(K) and IRAs also differ in their contribution limits. For instance, in 2023, the 401(K)contribution limit for people aged 50 and above was $22,500. On the other hand, the IRA limit for people above 50 was $7,5000.