IRA vs 401(k): How They Differ

Many people have both a workplace plan and an IRA. They look alike, but the rules are not the same. This guide compares them using IRS pages, so you know which questions to ask. It explains rules only. It does not say which account suits you.

What is the basic difference?

A 401(k) is set up by an employer. The IRS calls it "a qualified deferred compensation plan" (Topic 424). If you are eligible, your employer can take part of your pay and put it in the plan before income tax. The deferral is not reported as wages for income tax but still counts as wages for Social Security and Medicare tax. Some plans also let you choose "designated Roth contributions," which are made after tax.

An IRA (individual retirement arrangement) is an account you open on your own with a bank, broker or other approved provider. For the difference between traditional and Roth versions, see our guide to traditional vs Roth IRAs.

How do the 2026 limits compare?

The IRS announced the 2026 limits on November 13, 2025 (IR-2025-111).

The 401(k) catch-up figure applies to 401(k), 403(b), governmental 457 plans and the federal Thrift Savings Plan. The 401(k) limit covers your own deferrals. The IRS page we read does not cover the separate overall limit that includes employer money, so we do not give it here.

Whether a traditional IRA contribution is deductible when you have a workplace plan depends on income. For 2026, the IRS lists a deduction phase-out for a single person covered by a workplace plan of $81,000 to $91,000. Roth IRA contributions phase out between $153,000 and $168,000 for singles and heads of household, and between $242,000 and $252,000 for married couples filing jointly. The traditional-vs-Roth guide has the full ranges.

Can an employer add money to a 401(k)?

Some plans offer matching money. The IRS page on 401(k) plans we read does not describe matching, so check your plan. Ask your plan administrator for the plan document or summary.

What is vesting?

Vesting is how much of the employer's money you own. The IRS says for matching contributions the IRS describes "two alternative minimum vesting schedules" (IRS vesting snapshot):

A plan can be more generous, "including immediate vesting." The IRS example also shows that your own elective deferrals are "always 100% vested." If you leave before you are vested, you may lose part of the match, so check your plan's schedule.

How do early-withdrawal rules differ?

The IRS says distributions from 401(k) plans, including hardship distributions, "received before age 59½ are subject to the additional 10% tax unless an exception applies" (Topic 424).

One employer-plan exception is for money paid "after you separated from service with your employer after attainment of age 55" (Topic 558). That topic covers plans other than IRAs. We did not read the IRA exceptions in detail tonight, so do not assume the age-55 rule carries over to an IRA. We did not read the IRS rules for IRA withdrawals before 59½ tonight, so check them separately.

The IRS says many 401(k) plans allow hardship withdrawals because of "immediate and heavy financial needs." Check your plan's terms.

How do required minimum distributions differ?

Required minimum distributions (RMDs) are yearly withdrawals the IRS requires from most pre-tax accounts after a certain age. The IRS comparison chart shows differences (IRS RMD chart):

The chart says age 73. The start age can depend on birth year, so see our RMD age guide and the IRS RMD pages. For timing traps, see RMD deadline traps.

Can you roll a 401(k) into an IRA?

Generally yes. The IRS says you "can roll your money into almost any type of retirement plan or IRA" (IRS rollovers page). Two ways exist:

• Direct rollover. The plan sends the money straight to the IRA.
• 60-day rollover. The money is paid to you, and you deposit it within 60 days. Plan payments paid to you are "subject to mandatory withholding of 20%," so you would need other funds to roll over the full amount.

The IRS says the one-rollover-per-12-months limit for IRA-to-IRA rollovers does not apply to "plan-to-IRA rollovers." Our direct vs indirect rollover guide covers the steps.

What are common mistakes?

• Mixing up the numbers. The 401(k) and IRA limits in the table are different figures.
• Ignoring vesting. Leaving a job early can mean losing unvested match.
• Using old numbers. The IRS changes limits yearly.
• Taking a check in a rollover. The 20% withholding can create a shortfall.
• Assuming the age-55 exception works for an IRA. The IRS topic we read covers employer plans.

Questions to ask a professional

• What is my plan's match and vesting schedule?
• What are the plan's fees and investment choices?
• Would a rollover change my fees, choices or withdrawal options?
• How do my deductions and income affect IRA contributions this year?

Where gold and silver IRAs fit - and where they do not

A 401(k) menu is chosen by the plan, and we did not find an IRS statement on whether plans offer physical metals. A self-directed IRA is different: it can be set up to hold approved precious metals. People who consider this point to diversification, a long record of gold as a store of value, and the appeal of a tangible asset. These are arguments, not guarantees, and this site makes no price forecast.

Costs and rules apply. The IRS says an individually directed account's acquisition of a collectible "is treated as an immediate distribution" equal to its cost. Certain gold, silver and platinum coins, and gold, silver, platinum or palladium bullion of "a certain fineness" are excepted "if a bank or approved non-bank trustee keeps physical possession of it" (IRS collectibles page). Fees for the custodian, storage and dealer spreads reduce returns. Our gold IRA vs 401(k) comparison, 401(k)-to-gold-IRA rollover guide, fee guide and risk guide explain more. This site does not say whether metals suit any one person.

What we did not check

We did not read the IRS rules for IRA early-withdrawal exceptions, 401(k) loans, the overall annual limit including employer money, or plan-specific rules. Confirm with your plan documents, the IRS and a qualified professional.