Whats the difference between a 401(k) and an Individual Retirement Account (IRA)?
Both offer you ways to invest for retirement. The key difference between the two is the way the Internal Revenue Service views the dollars you contribute. Since your 401(k) contributions are considered deferred compensation, they’re not included as income on your W-2 form. IRA contributions aren’t always fully deductible from your taxable income, and the maximum amount you can contribute each year is generally lower. A 401(k) plan offers the added advantages of payroll deduction and, depending on your plan’s design, possible access to your money through loans or hardship withdrawals.
