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Did you know most people are allowed to invest in both 401ks and IRAs at the same time? There may be certain instances where you are not allowed to, however investing into both of these retirement plans is normally an option.

So, what is a 401k plan? A 401k allows employees to put money into the plan and save it tax defered until retirement comes along. The money which is deposited into the plan is deposited before it can be taxed and it is free to grow interest without being slowed down by taxes.

Your employer will normally manage and operate this plan for you and they may even automatically deposit a set amount of your income into the plan if you wish.

What is an IRA? An IRA is very similar, there are only a couple big differences. First of all an IRA has to be set up by the individual and that individual is responsible for the plan. IRAs do have one big advantage over other plans, and that is that they allow you to invest into a wide variety of investments.

For example while most 401k plans invest in mutual funds and bonds IRAs may be allowed to invest into stocks and in some cases even real estate.

Normally an investor can invest into both 401k plans and IRA plans, however there are some exceptions. If you have too high of an income you may not be allowed to invest into both.

Each of these plans are built to help you save money for retirement as a result both the 401k withdrawal rules as well as the IRA distribution rules do not allow investors to take money out of their account unless they are either 59 ½ or do not mind paying an early withdrawal penalty.

Combining these two plans can be a big help and aid you to save enough money to retire of off.