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What is the difference between a 401k and an IRA?
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The main difference between a 401k and an IRA is the type of contributions allowed. A 401k is sponsored by an employer and allows employees to save a certain percentage of their salary on a pre-tax basis, while an IRA is an individual retirement account which allows the account holder to make both pre-tax and post-tax contributions, depending on the owners individual circumstance. Additionally, 401k plans have higher contribution limits than IRAs, allowing people to save more money over time.