A 401(k) and IRA have different maximum contributions as well as different tax benefits. However, the most significant difference between the two is that a 401(k) is a type of employer-sponsored retirement account. If your employer offers a 401(k) retirement plan, your contributions to this account will be deducted from your paycheck. Your employer will also contribute to the account.
An IRA, on the other, is more self-driven. You don’t need to have an employer sponsoring this type of account to set one up. You set up the account yourself and decide when to withdraw funds. If you do have an employer, your contributions will still be deducted from your paycheck. Your employer also has the option to contribute to the account.