human
Can you explain the difference between a 401k, IRA, or Roth IRA?
assistant
A 401k is a retirement savings plan sponsored by an employer. It allows employees to save for retirement before taxes are taken out of their paycheck. The money saved in a 401k can be withdrawn tax-free when you retire. An IRA is similar to a 401k but it’s not tied to your employer. You can open one on your own and contribute up to certain limits each year. Withdrawals from IRAs are taxed at your ordinary income tax rate. A Roth IRA is similar to an IRA but contributions are made with after-tax dollars and withdrawals are tax free if used for qualified expenses such as education, medical bills, or home purchases.