Which is better: An IRA or 401(k)?

Retirement » Which Is Better: An IRA Or 401(k)?

Which is better: An IRA or 401(k)?
Which is better: An IRA or 401(k)? © Alistair Scott/

Working Americans eyeing retirement typically look to their company's 401(k) plan as the best place to nurture a nest egg. These plans contained about $3.5 trillion in assets in 2012, up from $1.6 trillion in 2002, according to the Investment Company Institute.

For many people, a 401(k) plan is the best choice, especially if their employer matches employee contributions up to a given percentage of their pay. A 401(k) also is easy to set up and use, with contributions flowing directly from your paycheck. Many companies automatically enroll their employees, so workers don't have to do a thing.

However, another popular retirement vehicle -- the individual retirement account, or IRA -- offers some key advantages over a 401(k).

Following are five ways in which investing in an IRA may trump using a 401(k) plan.


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