If you are looking for ways and means to invest money for your future, you will be glad to know that there are many options for you to choose from. The options can be narrowed down to the two most important savings vehicles, being the IRA and the 401k plan. These two accounts can be then divided in different types. The rules for both plans differ.
The 401k plan is a retirement plan which is employer based, and which carries the name of the tax code which regulates it. When contributing funds to this plan, you will be doing so from pre-tax income, and therefore saving lots of tax money.
The funds saved are then diversified into various stock options and funds, which you would have chosen beforehand. Your employer in this case will also have the option to match your savings amount, or a part of it. The funds will then be taxed when the times comes to withdraw, at pension age. At this point you will probably be in a lower tax bracket, thus saving lots of money in taxes.
IRAs are retirement accounts devised for individuals to invest on their own, as opposed to the 401k plan which is tied to your employer. In this plan you may invest up to $5000 yearly, and there is no way in which you can get the funds out before your retirement age. As opposed to the 401k plan, here the money is taxed on entry into the account.
Both accounts can help you maximize your retirement savings, especially if you decide to go for both, and balancing them out to reduce your taxes.
Reference: http://projectstocks.com/2009/06/how-to-invest-for-retirement/
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