IRA vs. 401(k)

You can buy gold coins and bullion in a self-directed IRA or 401(k) established with a trust company: Goldbroker offers precious metal IRAs.

IRAs and 401(k)s are great options for tax-advantaged retirement saving, as you don't pay any taxes on the growth of your investments. However, there are a few key differences between these types of plans.

What’s a 401(k)?

A 401(k) is a qualified employer-sponsored retirement plan and are retirement plans that are of the “defined contribution” variety, meaning you (and maybe your employer somewhere between 3-6%) contribute a certain amount each month, quarter, or year, but the payout you’ll receive during retirement will be based on the market value of the account. If your employer does not offer a 401(k) or other sponsored plan, you should probably just begin saving in a Roth IRA or traditional IRA which allows you to choose your investment options.

Who can participate?

Anyone who works for an employer that offers a plan. An employer will match your 401(k) contributions up to 6 percent of your salary, in 2015 and 2016, employees are allowed to contribute up to $18,000 of pre-tax income to a 401(k), and those over 50 can contribute an additional catch-up contribution of $6,000. The contribution limits for a 401(k) are roughly three times higher than that of an IRA.

What you can invest in a 401(k)?

Most employers limit you to a pre-selected list of investment choices. You can roll over your 401K into a Physical Precious Metals self directed IRA.

 

> For more details on 401K variations and rules: https://www.irs.gov/

What’s an IRA?

While the opportunity to contribute to a 401(k) is limited to people employed by companies that offer such plans, anyone can contribute to a traditional IRA (individual retirement account).

Who can participate? 

As long as they are under the age of 70½. Roth IRAs have no age limit. Like a 401(k), an IRA offers tax-deferred growth on your investments, this means assets in the IRA will not be taxed until they are withdrawn. A traditional IRA may also offer tax-deductible contributions for people who don’t participate in an employer-sponsored plan. Young people especially should consider the future benefits of a Roth IRA since many experts agree that tax rates could go up significantly over the next few decades.

A Roth IRA offers opposite tax advantages from a traditional IRA: You pay tax on income before you make contributions to the Roth IRA, but you’ll pay no tax on the earnings when you make withdrawals in retirement. After you meet a few basic requirements (once you’re 59 1/2 years old or older, and have had the plan for five years or more), you can withdraw both your deposits and investment appreciation completely tax free. You can also withdraw funds without penalty to pay for a child’s education or a down payment on your first house. However, not everyone qualifies for a Roth IRA. To qualify, you must have an adjusted gross income that is less than $116,000, or $183,000 for married couples filing jointly.

The limit for annual contributions to an IRA is $5,500 for 2015, and $6,500 for people over 50. That limit is the same for both traditional and Roth IRAs.

What can you invest in an IRA?

You can invest in a wide variety of mutual funds, exchange-traded funds (ETFs), and individual stocks and bonds. You can invest in Physical Precious Metals with a Self Directed IRA.

 

> For more details on IRA variations and rules: https://www.irs.gov

 

 Plan  401k  IRA
Contribution limit $17,500  $5,500
 Catch-up contribution limit for age 50 and over  $5,500  $1,000
 Total contribution limit for age 50 and over  $23,000  $6,500
 Maximum combined contribution for employee and employer  $52,000  N/A
Maximum combined contribution for employee and employer for age 50 and over $57,500   N/A