Video transcript: What are IRAs and 401(k)s? video

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This video uses text and infographics, presented as napkin sketches, to illustrate and reinforce spoken content.

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IRAs and 401(k)s.

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IRAs and 401(k)s are two common types of retirement accounts. An IRA, or Individual Retirement Account, is an account generally opened by you with a financial institution of your choice. With an IRA, the individual owner is typically the only one who contributes to the investment account.

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The Narrator's dialogue appears as written text on a napkin, along with a drawing of a watering can (labeled "Individual"). The watering can sprinkles a potted plant (labeled "Investment Account").

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A 401(k) is an employer-sponsored retirement plan. To invest in one, a 401(k) must be offered by your employer. Eligible individuals may contribute directly from their paychecks, and employers may also contribute.

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Common Types of Retirement Accounts. IRA: Individual Retirement Account: Opened by You. 401(k): Employer-Sponsored Retirement Plan: Offered by Employer.

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Under the banners "IRA" and "401(k)" drawings appears of watering cans (labeled "Individual") which sprinkle plants (labeled "Investment Account.") Under the "401(k)" banner, a hand (holding seeds) is labeled "Employer may also contribute."

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When saving for retirement, you may be able to have both an IRA and a 401(k) rather than using only one or the other.

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Good to Know. May Be Able to Have Both.

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A drawing shows two hands dropping seeds onto soil. The different seeds are labeled "IRA" and "401(k)"

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Both IRAs and 401(k)s come in two main types with different tax advantages. With traditional accounts, contributions to 401(k)s are tax-deferred, while those made to IRAs are potentially tax-deductible, depending on your situation. For both, you generally pay income taxes on withdrawals. With Roth accounts, your contributions are made after tax, and withdrawals you take are tax-free, as long as they are qualified distributions.

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A drawing appears of a plant (labeled "Traditional") with a leaf cut off, at the plant's bottom. A drawing appears of a plant (labeled "Roth") with a leaf cut off, at the plant's top.

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Although both IRAs and 401(k)s have advantages, one additional benefit of 401(k)s is that they have higher annual IRS contribution limits. Which can help you save even more.

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Two Main Types With Different Tax Advantages. Both IRAs and 401(k)s Have Advantages. 401(k)s Have Higher Annual IRS Contribution Limits.

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A drawing shows a seed dropping into a flowerpot (labeled "IRA") and a seed dropping into a bigger flowerpot (labeled "401(k)").

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Since everyone's situation is different, you should speak with your tax advisor about what’s right for you. Remember that no matter where you are on your investing journey, the best time to start saving for retirement is probably now.

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J.P. Morgan Wealth Management logo.

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Legal discourses appear.

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Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.

Asset allocation/diversification does not guarantee a profit or protect against a loss.

Past performance is not a guarantee of future results.

JPMorgan Chase and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.

This video and its content have been developed for J.P. Morgan Securities LLC clients and prospects, is for informational and educational purposes only, and is designed to provide general market commentary and information relating to certain services offered by J.P. Morgan Securities LLC, an affiliate of JPMorgan Chase & Co. Opinions expressed herein are those of the author and may differ from those of other J.P. Morgan employees and affiliates. The information in no way constitutes J.P. Morgan research and should not be trusted as such. Further, the views expressed herein may differ from that contained in J.P. Morgan research reports.

The information and views expressed are not intended to provide specific advice or recommendations for any individual. You should carefully consider your needs and objectives before making any decisions. For specific guidance on how this information should be applied to your situation, you should consult your Advisor.

J. P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment advisor, member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA, and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.