The differences between the two plans are nearly as many in number as their similarities.
How an account gets setup and administered
A 401(k) plan can be created via your employer. This is why a 401(k), as well as a 403(b), is known as “employer-sponsored plan”.
IRA retirement plans, conversely, are created and ran by financial institutions for the most part. Your employer does not need to be involved with your IRA plan. And the investment vehicles are also maintained in different ways.
Contribution limits
For 401(k) plans, the investment limits as of 2018 are $18,500 per account. This is up $500 from the previous year. And, this is up from $17,500 in 2015.
For IRA accounts, the limit is significantly less. Currently, this is $5,500 (under the age of 50) and $6,500 (age 50 and older). These totals are for all combined IRA accounts – traditional and Roth.
For more information about contribution limits, please refer to the IRS website concerning retirement contributions.