The biggest difference between a 401(k) and an IRA is how much you can contribute to the accounts. With the 401(k), if you are under 50, you can contribute up to $17,500 plus employer matches if they are available while the IRA is limited to $5,500 (under age 50).
If you are older than 50, the limits are increased a bit. Both accounts are tax-deferred, designed to be used during retirement, over age 59 1/2 otherwise penalties will be charged.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
A 401(k) is an employer sponsored plan. The employer is not required to but often contributes to the plan. An IRA is an Individual plan. You start the plan, make the contributions and own the plan. The amount of money that can be set aside into these plans differs dramatically and changes every year.
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If you are older than 50, the limits are increased a bit. Both accounts are tax-deferred, designed to be used during retirement, over age 59 1/2 otherwise penalties will be charged.