In this episode of the Money Viper podcast, host Jermaine Harris discusses the differences between 401(k) plans and Individual Retirement Accounts (IRAs). A key distinction is that a 401(k) must be established by an employer, while an IRA is set up by an individual. Many employers offer 401(k) plans, often with matching contributions that can significantly boost retirement savings, typically matching between 3-5% of employee income. However, 401(k) plans can be less flexible regarding investment options, as they usually restrict investments to specific ETFs and stocks.

In contrast, IRAs are independent of employment and provide more flexibility in choosing investments. Both account types allow for traditional and Roth contributions. Traditional contributions are made pre-tax, allowing for tax deductions, while Roth contributions are made post-tax, meaning taxes are paid upfront. The contribution limits differ significantly, with 401(k)s allowing over $20,000 annually compared to around $7,000 for IRAs (with an additional $1,000 for those over 50). Harris shares his preference for Roth contributions, emphasizing the benefits of lower taxable income in the future. Overall, he encourages listeners to consider the advantages of both account types when planning for retirement.

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