What is a difference between the typical structure of a retirement savings account (401(k)) and an individual retirement arrangement (IRA)?
A) IRAs typically earn interest, but 401(k) accounts typically earn dividends.
B) IRA contributions are typically made with pretax income while 401(k) contributions are made with post tax income.
C) Employers often match 401(k) contributions, but they do not match IRA contributions.
D) Taxes are due on withdrawals from an IRA but not on withdrawals from a 401(k) account.

Question

Quizplus · Accepted Answer

The main difference between a 401(k) and an IRA is that a 401(k) is an employer-sponsored retirement plan while an IRA is an individual retirement arrangement. Due to this, employers often match the contributions made to a 401(k) account, but they do not match contributions made to an IRA. Additionally, while both types of accounts offer tax advantages, the specific tax treatment of contributions and withdrawals can vary.

What Is a Difference Between the Typical Structure of a Retirement