The Little Differences Between 401(k)s and IRAs Can Cost Big Bucks

Individual retirement accounts and 401(k) plans share many features in common, but they also have subtle differences. Not knowing the nuances can raise a tax bill—sometimes by a lot.

Both IRAs and 401(k)s are tax-favored retirement accounts, and with the demise of traditional pensions people have turned to them to save for their golden years. At the end of 2018 such accounts held $16.3 trillion in assets, nearly triple the $5.6 trillion total in 2000, according to the Investment Company Institute.


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