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Originally Posted by Aspengc8
Financial gurus of the CP, I come to you with a question. I have a 401K with the company I have been with for the last 12+ years. What is the differences between 401K and IRA? They also offer a IRA and I can start contributing to that as well as with the 401k, should I be doing that?
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If it is a traditional IRA, there isn't a lot of difference structurally. However, 401k contributions are made
Pre-tax. This is a giant deal. Essentially, any money you put in a 401k reduces your taxable income. If you look at your paystub, it essentially, gross pay - 401 contributions = net taxable then they calculate withholdings.
Now, you can essentially do the same thing with a IRA, but it is done after the fact on your tax return and it is limited at $5,000. 401k limits are $14,000.
I'd keep it in the 401k unless you are hitting your limits.