Retirement Accounts • July 21, 2026 • 7 Min Read
Demystifying the 401(k) and IRA: A Simple Guide
When you decide to start saving for retirement, you are immediately bombarded with alphabet soup: 401(k), Roth IRA, Rollover, TSP, 403(b). It looks like coding, and it makes many of us shut down.
Let’s translate these accounts into plain English.
1. The 401(k) or 403(b): The Employer Box
This box is opened through your job. The money is deducted automatically from your paycheck, which means you never see it and can’t spend it.
The Tax Rule: Typically pre-tax. Contributions lower your taxable income today, but you pay taxes when you withdraw the money in retirement.
Track Your Portfolio: Use Empower’s free fee-analyzer tool to examine your employer 401(k) account and find hidden administrative fees that might be eating your returns.
2. The Roth IRA: The Post-Tax Box
You open this box yourself at a brokerage. You contribute money that has already been taxed (like your paycheck cash).
The Tax Rule: Post-tax. Since you paid tax today, your investments grow completely tax-free, and you pay zero taxes on withdrawals after age 59.5. This is our favorite container for long-term growth.
3. The Traditional IRA: The Pre-Tax Individual Box
Like the Roth, you open this box yourself. However, your contributions may be tax-deductible today, and you pay tax upon withdrawal in retirement.
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