On the other hand, IRAs are not employer-sponsored and have lower contribution limits than 401 (k) s, but they also offer more flexibility and investment options. Both accounts are retirement savings instruments, but a 401 (k) plan is a type of employer-sponsored plan with its own set of rules. A traditional IRA, on the other hand, is an account that the owner sets up without the involvement of the employer. The good news is that you don't necessarily have to think about an IRA versus a 401 (k).
You can save with both, as long as you qualify and respect contribution and income limits. Some common suggestions, depending on the person's financial situation, include funding a 401 (k) plan with the amount needed to receive the full equivalent contribution from the employer before saving in an IRA, and dividing retirement savings contributions between pre-tax and Roth contributions to take advantage of both types of tax benefits.