{"slug":"401k-vs-ira","question":"401(k) vs IRA","answer":"A 401(k) is an employer-sponsored retirement plan with higher contribution limits ($23,500 in 2025) and potential employer matching, while an IRA is an individually-opened account with lower limits ($7,000 in 2025) but greater investment flexibility and wider availability to all workers.","answer_curated":true,"verdict":"Choose a 401(k) if your employer offers matching contributions and you want to maximize retirement savings with higher annual limits and employer-provided funds. Choose an IRA if you're self-employed, don't have access to a 401(k), want complete control over investments, or need more flexible early withdrawal options.","keyDifferences":[{"label":"Annual Contribution Limit (2025)","winner":"a","entityAValue":"$23,500","entityBValue":"$7,000"},{"label":"Employer Match Availability","winner":"a","entityAValue":"Yes, commonly 50-100% of contributions up to 6%","entityBValue":"No employer match"},{"label":"Required Minimum Distribution Age","winner":"tie","entityAValue":"73 years old (as of 2023 SECURE 2.0)","entityBValue":"73 years old (as of 2023 SECURE 2.0)"},{"label":"Investment Options","winner":"b","entityAValue":"Limited to plan-selected investments (typically 10-20 funds)","entityBValue":"Unlimited investment choices across stocks, bonds, ETFs, mutual funds"},{"label":"Early Withdrawal Penalty (before age 59½)","winner":"b","entityAValue":"10% penalty plus income tax; rule of 55 exception if separated from service at 55+","entityBValue":"10% penalty plus income tax; Roth IRA contributions can be withdrawn anytime tax/penalty-free"}],"winner":{"slug":"401-k-matching","name":"401(k)"},"confidence":"high","entities":[{"name":"401(k)","slug":"401-k-matching","url":"https://www.aversusb.net/entity/401-k-matching","alternativesUrl":"https://www.aversusb.net/api/v1/alternatives/401-k-matching"},{"name":"IRA (Individual Retirement Account)","slug":"ira-individual-retirement-account","url":"https://www.aversusb.net/entity/ira-individual-retirement-account","alternativesUrl":"https://www.aversusb.net/api/v1/alternatives/ira-individual-retirement-account"}],"faqs":[{"question":"Can I have both a 401(k) and an IRA?","answer":"Yes, you can contribute to both in the same year. However, if you have a 401(k) and want to contribute to a Traditional IRA, your Traditional IRA deduction may be limited based on your Modified Adjusted Gross Income (MAGI). Roth IRA contributions have separate MAGI limits. For example, in 2025, a single filer with a 401(k) cannot deduct Traditional IRA contributions if MAGI exceeds $77,000, but can still contribute to a Roth IRA if MAGI is below $146,000."},{"question":"What happens to my 401(k) if I leave my job?","answer":"When you leave your job, you have several options: (1) leave the money in your former employer's plan if the balance exceeds $5,000, (2) roll it over into an IRA (giving you more investment choices), (3) roll it into your new employer's 401(k) if available, or (4) take a lump-sum distribution (which triggers income tax and a 10% penalty unless you're 55+ and separated from service). Most financial advisors recommend rolling into an IRA to gain investment flexibility."},{"question":"Is a Roth 401(k) different from a Roth IRA?","answer":"Yes. Both use after-tax contributions with tax-free growth, but Roth 401(k)s have higher contribution limits ($23,500 in 2025), required minimum distributions at age 73, and limited investment options. Roth IRAs have lower contribution limits ($7,000 in 2025), no required distributions in your lifetime, unlimited investments, and allow penalty-free withdrawal of contributions anytime. Roth IRAs are generally preferred for flexibility; Roth 401(k)s suit higher earners who max out regular 401(k)s."}],"attribution":{"source":"A Versus B","url":"https://www.aversusb.net/compare/401k-vs-ira","license":"CC BY 4.0","citationFormat":"According to A Versus B (https://www.aversusb.net/compare/401k-vs-ira), A 401(k) is an employer-sponsored retirement plan with higher contribution limits ($23,500 in 2025) and potential employer matching, while an IRA is an individually-opened account with lower limits ($","dateModified":"2026-10-19T12:16:21.402Z"},"relatedQuestionsUrl":"https://www.aversusb.net/api/faq/401k-vs-ira","relatedComparisonsUrl":"https://www.aversusb.net/api/v1/related/401k-vs-ira","knowledgeGraphUrl":"https://www.aversusb.net/api/knowledge-graph/401k-vs-ira"}