When it comes to saving for retirement, two of the most common tools available to investors are the IRA and the 401(k). While both offer valuable tax advantages, they differ in how they’re funded, how much you can contribute, and how flexible they are when it comes to investment options and withdrawals.

At Stonebrook Private, we work with clients to help them understand how these accounts function—not in isolation, but as part of a broader strategy designed to support retirement with clarity and long-term tax efficiency.

A 401(k) is a retirement savings plan sponsored by an employer. Contributions are typically deducted directly from your paycheck, and many plans offer a matching contribution from the employer, which can provide a meaningful boost to long-term savings.

These plans offer the choice of contributing to a traditional 401(k), which provides tax-deferred growth, or a Roth 401(k), which allows for after-tax contributions with the benefit of tax-free withdrawals in retirement. However, investment choices are limited to the menu selected by the plan provider, and fees can vary depending on the plan’s structure.

One of the key advantages of a 401(k) is the higher contribution limit compared to other retirement savings vehicles. In 2025, individuals can contribute up to $23,500, with an additional $7,500 in catch-up contributions allowed for those age 50 or older.

An Individual Retirement Account (IRA) is a retirement savings vehicle you can open and manage independently—without relying on an employer. IRAs can also be traditional (tax-deferred) or Roth (after-tax), offering the same basic tax structure as a 401(k), but with more flexibility in terms of how funds are invested.

While IRAs allow for a wider selection of funds, ETFs, and individual securities, the contribution limits are more modest. For 2025, individuals can contribute up to $7,000 annually, with an additional $1,000 catch-up contribution available for those over age 50.

IRAs are often used to supplement 401(k) plans, roll over old retirement accounts from previous employers, or serve as a more customizable foundation for long-term retirement investing.

To help illustrate the key distinctions, here’s how the two account types compare:

At Stonebrook Private, we don’t look at retirement accounts in a vacuum. Instead, we help clients understand how to coordinate their 401(k), IRA, and other investment vehicles into one unified, tax-aware strategy.

Our process includes managing rollovers, evaluating Roth conversion opportunities, optimizing asset allocation across account types, and planning tax-efficient withdrawal strategies for retirement. The goal is to make sure each part of your retirement plan works together—intentionally and efficiently.

Understanding the differences between IRAs and 401(k)s is an important step toward building a more informed retirement plan. Whether you’re looking to maximize workplace benefits or create a custom investment strategy on your own, making the right decisions today can pay off in the years ahead.

If you’re ready to discuss how these accounts fit into your broader plan, we’re here to help guide the way.