A 401(k) is an employer-sponsored retirement savings plan that allows contributions through automatic paycheck deductions. The company might match the contributions up to a certain amount or percentage. In contrast, an Individual Retirement Account (IRA) is a retirement savings option available to anyone with earned income or whose spouse has earned income. This account is funded with contributions from a bank account. Similarities Between a 401(k) Plan and an IRA A 401(k

Most employers offer a 401(k) plan as part of their employee benefits package. This defined contribution plan helps employees save for retirement. Many employers offer matching 401(k) contributions up to a certain amount or percentage to encourage employees to save for retirement. The money employees have to live on in later years depends on the amount contributed and the performance of the underlying investments. The following are the five main types of 401(k) plans. 1