With a traditional IRA, you can withdraw money penalty-free for certain life events, such as buying a house, getting an education, medical expenses or to pay health insurance premiums after a job loss, says Bendix.
On the other hand, you generally can't borrow from a traditional IRA, though most 401(k) plans allow participants to take a loan, says Bendix.
But if you can't repay the 401(k) account on time, or if you lose your job and can't repay it immediately, it's considered an early distribution. You'll owe a 10 percent penalty plus taxes.
Borrowing from your 401(k) is "one of the worst financial moves to make," says Slott.
Bogosian recommends a compromise: Stash money in a 401(k) for retirement, and in a Roth IRA for your emergency fund.
"You can't beat the Roth for savings flexibility," he says. "Put it in, take it out as you need, just don't touch the earnings. And after five years, up to $10,000 in earnings can be used tax-free to buy your first home."