What is the difference between a 401k and an IRA?

Both are tax-advantaged retirement accounts, but they differ in key ways. A 401k is employer-sponsored, meaning you sign up through your job, and employers often match a portion of your contributions. The 2024 contribution limit is $23,000. An IRA (Individual Retirement Account) is opened independently through a bank or brokerage, with a much lower contribution limit of $7,000 in 2024. Both come in traditional and Roth versions. Traditional accounts give you a tax deduction now and you pay taxes on withdrawals in retirement. Roth accounts use after-tax money now, but withdrawals in retirement are tax-free. Most financial advisors recommend contributing enough to your 401k to get the full employer match first, then funding an IRA.