Pre-tax or Roth Contributions: Depending on your plan, you may have the option to make pre-tax contributions (like a traditional IRA) or after-tax contributions (like a Roth IRA). Some plans even offer both.
Taxes on Withdrawals: Like an IRA, the money you withdraw during retirement from a traditional 401(k) is taxed as regular income. Withdrawals from a Roth 401(k) are tax-free.
Employer Match: Many employers will match a portion of your 401(k) contributions, which can significantly increase the value of the account.
Higher Contribution Limits: The annual contribution limit for a 401(k) is much higher than for an IRA.
Early Withdrawal Penalty: Similar to an IRA, there's typically a 10% penalty for withdrawing funds before age 59 1/2, with certain exceptions.