SECTION 4 OF 8
The basics
A retirement account is a container for money and investments. A 401(k) is offered through an employer. An IRA is an individual retirement arrangement you can open if you meet the rules. Opening an account is different from choosing the investments inside it.
Traditional and Roth describe tax treatment. Traditional contributions may offer a tax break now; withdrawals are generally taxable. Roth contributions use money already taxed, and qualified withdrawals are tax-free. Eligibility, limits and withdrawal rules apply. Some employers add a match; check the plan’s rules, including when that employer money becomes yours, called vesting.
A simple example
Think of an account as a lunchbox and investments as what goes inside. The lunchbox’s label explains its rules. It does not tell you what you are holding or how risky it is.
Useful resources
- IRS: traditional and Roth IRAs (opens in a new tab)
An official comparison of traditional and Roth IRA rules. Follow current-year IRS guidance for limits.
- IRS: 401(k) plan overview and employer contributions (opens in a new tab)
Background on workplace contributions, employer matches and ownership of employer contributions.
How this connects
An account explains the rules around money. Investments explain what that money is actually held in. The next section connects the two.
U.S. retirement education · Examples are illustrative. How we create these resources.
From the creator of Friendly’s Financial on YouTube. General education, with no personal financial recommendations.