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What are the main differences between a 401k and a IRA?
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The main differences between a 401k and an IRA are the amount of contributions allowed, the type of investments available, the vesting schedule, the taxation rules, and the withdrawal options. A 401k is typically offered by employers as part of their retirement plan and allows employees to make pre-tax contributions up to a certain limit each year. An IRA is an individual retirement account that allows individuals to save for retirement with after-tax dollars. Contributions to a 401k may be tax-deductible while those to an IRA are not. Withdrawals from a 401k are taxed differently than withdrawals from an IRA.