A 401K is a type of employer retirement account. An IRA is an individual retirement account. Both accounts are retirement savings vehicles, but a 401 (k) plan is a type of employer-sponsored plan with its own set of rules. A traditional IRA, on the other hand, is an account that the owner sets up without the employer's involvement.

A 401 (k) plan is a feature of a qualified profit sharing plan that allows employees to contribute a portion of their salaries to individual accounts.