Saving for retirement might not always feel urgent, but the sooner you start, the stronger your financial future can be. Two of the most common tools for retirement savings, the 401(k) and the IRA, each offer unique benefits. Understanding the differences is especially important in today’s economic climate. Whether you’re just starting or reevaluating your plan, Nick Hamilton, Senior Manager at Alliant Retirement and Investment Services, offers a few tips to help you make confident, informed choices.

What you’ll learn:

• What is a 401(k)
• What is an IRA
• How taxes pay a part
• Choosing the best account for your financial future

What is a 401(k)

If your employer offers a 401 (k), it’s often a smart place to begin. Contributions are automatically deducted from your paycheck, making it easier to maintain a savings habit. Many employers also offer matching contributions, which is essentially free money toward your future.

“Even in times of market uncertainty, contributing enough to earn your employer’s match is usually a win. If you have questions about how much to contribute or how to allocate your investments, a financial professional can walk you through your options and help you build a strategy that fits your long-term goals,” said Hamilton.

What is an IRA

Now, if you’re looking for more control over your investments or don’t have access to a workplace plan, an IRA (Individual Retirement Account) could be the right choice. You can open an IRA independently and choose from a wide range of investment options. For those self-employed, working part-time, or simply looking to supplement their retirement savings, IRAs offer flexibility and customization.

“One big difference is the 401k is an employer-sponsored plan that you can contribute to through payroll deduction vs an IRA you contribute to from your savings account,” said Hamilton. “There are no differences between how each plan reacts to Market downturns. The IRA allows you to have more flexibility with how the money is invested since the 401 (k) sometimes has limited investment options,” he said.

How taxes play a part

Taxes are another big consideration. Traditional 401(k)s and IRAs offer tax-deferred growth, meaning you contribute pre-tax dollars today and pay taxes later when you withdraw funds in retirement. Roth accounts flip that model; you pay taxes now but get the benefit of tax-free withdrawals later.

With inflation, interest rate fluctuations, and potential changes to tax laws in the mix, it can be challenging to determine the best approach. That’s where working with a trusted advisor can make a difference. They’ll help you weigh your current financial picture against your future needs to create a strategic and sustainable plan.

Choosing the best account for your financial future

Choosing between a 401(k) and an IRA doesn’t have to be an either-or decision. Many people benefit from using both, depending on what’s available to them. The key is to start saving and keep saving; even small, consistent contributions can add up over time. One way to stay ahead is to reevaluate what you’re contributing regularly.

“It is important to rebalance on a quarterly or annual basis since you may be more aggressive or conservative with your asset allocation depending on how the market has done over the last year. Rebalancing allows you to stay within your stated allocation and not become overweight in a certain asset class,” said Hamilton.

No matter where you are on your financial journey, planning for retirement doesn’t have to be overwhelming. With the right tools and the right team, you can feel confident about the road ahead.

Please note: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Asset allocation does not ensure a profit or protect against a loss. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Financial professionals are registered reps with, and securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Alliant Credit Union (ACU) and Alliant Retirement and Investment Services (ARIS) are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using ARIS, and may also be employees of ACU. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, ACU or ARIS. Securities and insurance offered through LPL or its affiliates are: