Saving for retirement is important, no matter what type of plan you opt to house your money in. But IRAs and 401(k)s differ in many ways, and choosing the right account could be instrumental in growing wealth for your senior years.

If you're not sure which retirement plan is right for you, here are four questions that will help you arrive at that decision.

1. How much do you want to contribute toward retirement each year?

Employer-sponsored 401(k)s come with much higher contribution limits than IRAs. In both 2020 and 2021, 401(k)s max out at $19,500 for workers under 50 and $26,000 for those 50 and older. IRAs, on the other hand, max out at $6,000 for savers under 50 and $7,000 for the 50-and-over set.

For many people, lower contribution limits aren't a problem; maxing out a 401(k) is often out of reach for anyone who isn't a higher earner. But if you have the potential to contribute more than what IRAs allow for, a 401(k) may be a better bet.

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2. Does your employer offer a 401(k) match?

Many companies that sponsor 401(k)s also match employee contributions to varying degrees. If your 401(k) comes with a generous match, then it generally pays to save in that employer plan, because you could end up with free money for your senior years. On the other end, if your employer doesn't offer a match or its match comes with a lengthy and restrictive vesting schedule, then you may decide to forgo the 401(k) and favor an IRA, instead.

3. Are you interested in a Roth savings account?

Though more and more 401(k)s are starting to come with a Roth savings feature, not every employer plan has this option. Roth savings accounts allow you to enjoy tax-free gains on your plan investments plus tax-free withdrawals during retirement. That could, in turn, make it easier to manage your money when you're a senior.

If your employer's 401(k) doesn't offer a Roth option, then you may want to open a Roth IRA. That said, Roth IRAs come with income limits that bar higher earners from making direct contributions. Roth 401(k)s, on the other hand, don't take income into account.

4. What investments do you want to choose from?

Generally speaking, IRAs offer a much wider range of investment choices than 401(k)s. With a 401(k), you may be limited to just a dozen or so funds, many of which come with hefty fees, known as expense ratios, that eat away at your returns. With an IRA, you can choose different funds or buy individual stocks.

Not everyone has the knowledge, time, or patience to select stocks for retirement one by one. But if you're an educated investor and willing to do the legwork, you may find that an IRA better allows you to assemble a portfolio that aligns more closely to your risk tolerance and goals.

Making the call

Ultimately, there's no right or wrong answer when it comes to funding an IRA versus a 401(k), and saving in either plan is a great way to set yourself up for a secure retirement. That said, if you're having trouble choosing between the two options, you might consider utilizing both.

You're allowed to fund both an IRA and 401(k) at the same time, though whether you get a tax break for traditional IRA contributions in that scenario will depend on your income. (If you're a higher earner covered by a workplace 401(k), you may not get to deduct your IRA contributions.) But if you'd rather stick to a single account, be sure to weigh the pros and cons of each option before deciding.