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What is the difference in between an IRA and a 401K?
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The main difference between an Individual Retirement Account (IRA) and a 401(k) is how the contributions are made and how the contributions are taxed. An IRA requires an individual to make contributions with after-tax dollars, while 401(k) contributions are made with pre-tax money. In addition, IRA contributions are limited to a certain amount each year, whereas 401(k) contributions can be significantly higher. Finally, when it comes to taxes, withdrawals from an IRA are taxed in the year they are taken out, while retirement income from a 401(k) can be taxed upon withdrawal.