Down the line, we plan to have a smooth and happy period of golden years. It is fair enough a very bright idea to have the future well planned before us. And since we are never too young to save for the golden years, we need to decide early enough on which retirement investment plan to take. The two most popular plans are the IRA(Individual Retirement Account), which includes both the traditional IRA and the Roth IRA and the 401(k) which, also, has Roth 401(k) too.
For us to have a fair 401k vs IRA discussion, we need to understand clearly what the plans entail. To begin with, the IRA is a plan that you yourself set for your retirement savings but with a little help from a financial institution like the bank, your financial planner or even a brokerage firm. In this case, you deposit a certain amount of money in the institution every year. Note that you have the freedom to choose which investment house to use and can always move your investments from one investment house to the other. On the other hand, for a 401(k) plan, your employer has the say since the plan is through the employer.
The amount that you pay for the Traditional IRA is not taxed, it is deducted from your taxable income lowering the income-tax bracket. For the Roth IRA, you are taxed before you contribute, however, you withdraw the amount from your financial institution tax-free. In this case, we may not be able to decide which is better between the 401(k) plan and the IRA since the 401(k) plan works exactly like the traditional IRA. However in the case of the 401(k) plan, there are no benefits in terms of the tax you pay upon withdrawal of your money.
Some companies offer a 401(k) plan to their employees, I advice that you contribute to it straight away. This is because it is free money. By the way, there are some employers who match up to 6% of your salary, another big reason to say 'yes!' to it! Since the money is deducted before you are taxed and you only get taxed later on when you start using it, I advice that to avoid all that burden of heavy taxation, use it after you retire. This is because your income-tax bracket is lower during this time. One big advantage of the 401(k) plan, unlike the the traditional IRA, is that you can borrow the money in case some emergency knocks at your door. But then, you have to pay the whole amount back, to avoid a fine, it's your money, but no rights to it before 'it's time'. For the Roth IRA, you can only be able to withdraw the amount after the account is at least five years old, let's hope there's no emergency before then. Right?
One advantage with the IRA, you decide what your money is invested for, maybe bonds, stock or anything else. For 401(k) plan, you do not decide, however, make a followup of where your money is invested, otherwise if your company invests the 401(k) money carelessly, you are likely to say "goodbye my savings". A great comparison between IRA and 401k has been done by wikipedia, that you can find here.
The bottom line is, both plans have pros and cons, but are meant to benefit you altogether, so choose the one that is of much convenience to you. You can also find out about Gold IRA retirment account and how you can build your weight by investing in gold.