All four are retirement plans classified as “defined contribution” plans.  All four are offered by employers through a third party financial institution called an “administrator” as a tax-deferred investment vehicle to encourage you to save for retirement.  So what’re the differences?

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Abstract

A common misconception is that 401(k)s and IRAs save you from income tax.  They don’t, but they do save you from capital gains tax.  With compounding, the additional earnings from tax-advantaged accounts over taxable accounts can be large.

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