401(k) And IRA Basics

Understanding retirement accounts is essential for long-term financial planning. Here’s the core points from the lesson:

• 401(k)s allow automated payroll contributions (up to $23,500 in 2025 for those under 50), often include employer matching, and offer pre-tax or Roth contribution options
• Contributions reduce taxable income but are still subject to payroll taxes like Social Security and Medicare
• IRAs (individual retirement arrangements) are similar to 401(k)s but are personally managed, have lower contribution limits, and don’t include employer matching
• IRA contributions may be tax-deductible or Roth-eligible depending on your income, unlike 401(k)s which have no income-based restrictions for pre-tax contributions

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