401k vs Traditional IRA: Which Should You Choose?
Deciding between retirement accounts can be tricky. We break down the differences between 401k and IRA to help you retire comfortably.
Choosing between a 401(k) and an Individual Retirement Account (IRA) is one of the most important decisions for your long-term financial health. Both offer tax advantages, but they serve different needs.
The Major Hub: 401(k)
The biggest draw of a 401(k) is the Employer Match. If your company offers a 100% match on the first 5% of your salary, that's an immediate 100% return on your investment. In 2026, many companies have also introduced Roth 401(k) options, giving you more flexibility.
The Flexible Alternative: Traditional IRA
An IRA usually offers a wider range of investment options compared to the curated list in a 401(k). If you want to invest in specific stocks, ETFs, or alternative assets, a Traditional IRA might be for you. However, contribution limits are significantly lower than 401(k) limits.
Which one for you?
- Choose 401(k) if: Your employer offers a match and you want to contribute large amounts.
- Choose IRA if: You want more control over your investments or your employer doesn't offer a retirement plan.
- Best Strategy: Get the full employer match in your 401(k), then max out your IRA, and then put any remaining funds back into your 401(k).