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The IRA and 401K are two tax-advantaged retirement savings plan that offer retirees income during their retirement. Both plans allow for you to save for retirement without paying taxes at one point or another. In fact, as long as you meet income requirements, you can enroll in both retirement plans.


To qualify for an IRA, you need to have received income in the past and be below the age of 70. Your income also has to be below specified levels, which differ for people who file jointly. Unlike with a 401K, you do not need an employer to contribute to an IRA.

Traditional IRA

Contributions to a traditional IRA can be tax-deductible. Contributions into a traditional IRA are not taxed, when they are placed in. However, withdrawals are taxed during retirement. Traditional IRAs are optimal for individuals who believe that they will need more of their income during retirement than they currently do.

Self-Directed IRA

Most IRA custodians limit why types of investments you can make. A self-directed IRA is directly controlled by the individual, which means you can make any investment you want. This includes real estate, private mortgages, precious metals, oil and gasoline, etc.

Roth IRA

Contributions to a Roth IRA are not tax-deductible. When an individual retires, they are able to withdraw the money without being taxed. Roth IRAs are great for individuals who believe that they will be in a higher tax bracket during retirement.


To qualify for a 401K, you need to work for an employer that offers a 401K retirement plan. A 401K offers a higher contribution amount than both types of IRAs; the contribution amount is over three times higher than an IRA. This contribution amount is for individuals alone, with matching employer contributions the amount can be over six times greater than an IRA.

There are different costs that apply to 401Ks. Depending on how the investment account is managed, whether actively or passively, costs can vary among companies.

Roth 401K

There is no limit to the amount of income that you can receive in order to contribute to a Roth 401K.

The Winner

If you work for an employer that matches your contributions, towards your retirement plan, a 401K is the best option. This is due to the fact that you can contribute nearly ten times the amount, with employer contributions, than you can with an IRA. IRAs are great investment plans though. However, each plan varies based on your financial standing now and your expected financial standing during retirement. Both plans are a great step towards saving for retirement and providing yourself with a form of income during these relaxing years.

If you would like more information, contact Gary Chidsey at (330) 722-4444 Ext. 709 or email him at [email protected]