Advantages of an IRA over a 401(k) include its availability to anyone, no automatic enrollment, and the possibility of not having as many restrictions on distributions as with a 401(k), states U.S. News & World Report. One downside is that an IRA has lower contribution limits compared to a 401(k).
Only employees of companies that offer 401(k) plans are able to sign up for a 401(k), notes U.S. News & World Report. Employers are also able to place restrictions on who is allowed to enroll in a 401(k) plan and when the employee can do so. Anyone younger than 70 and a half is able to have an IRA. One disadvantage is that there are some income limitations to IRAs.
Some employers automatically enroll employees in a 401(k) whether they desire to have a plan or not, states U.S. News & World Report. Employers might also have automatic increases to account contributions. One advantage of standard 401(k) contributions is that they can lower an employee's taxable income. Income taxes apply to traditional money contributions on both IRAs and 401(k)s once the account holder starts drawing money from the account.
As of 2013, account holders are only able to contribute as much as $5,500 to a traditional and a Roth IRA, while they can contribute $17,500 to a 401(k), according to U.S. News & World Report. It's possible to have both an IRA and a 401(k) at the same time.