Personal IRA vs. Employer-Sponsored Retirement Plans 

By Brett Gottlieb

​​Each day you work brings you closer to your career’s finish line and the much-anticipated chapter of life called retirement, bringing more time with loved ones, exploring new places, and enjoying hobbies. But turning that dream into reality requires careful planning and consistent saving.

With so many retirement savings options available, choosing the right one for your needs can feel overwhelming. The two most popular accounts that help grow your savings and pursue retirement goals are the individual retirement account (IRA) and employer-sponsored retirement plans (ESRPs).

To make this easier, we’ve highlighted the 3 main differences between these accounts so you can confidently decide which fits your situation best.

1. Contribution Limits

You want to save as much as possible, right? Well, that might determine what account you choose. One major difference between a personal IRA and an ESRP is the contribution limit. For an IRA, you can contribute up to $7,000 per year if you are under the age of 50, or $8,000 per year if you are age 50 or older.

On the other hand, the maximum annual contribution for ESRPs is $23,500, or $30,500 if you are over the age of 50. And that’s just how much you can contribute; anything your employer chooses to match or contribute doesn’t count toward that limit.

Although it is wise to make sure you contribute enough to receive any match your company offers through an ESRP and max out those accounts each year, if possible, anyone with a taxable income can contribute to an IRA as well. This increases your total contribution limit to $30,000, or $38,500 for those 50 and older, each year when you max out both an IRA and an ESRP.

2. Investment Options

IRAs are accounts you open and can control, which means you have quite a few investment options. There are generally more stocks, bonds, mutual funds, and index funds to choose from as compared to what your ESRP offers. Employers select a certain number of investment options to offer and that is all you get. You tend to have more flexibility with where your money is invested with an IRA.

Choosing investment options using an IRA and contributing the full $7,000 per year to the account before making maximum contributions to your ESRP could be a wise strategy, depending on how advantageous the employer-selected options are for your financial situation. Also, watch out for fees with your ESRP funds. With fewer options, you may not have as many low-fee choices as an IRA.

3. Tax Implications

Would you like to save more on taxes? That’s what I thought. How you save your money impacts your tax treatment, so pay attention to this point.

Many employers now allow their employees to choose how to invest their money: in a traditional ESRP or Roth ESRP. With traditional ESRPs, you can claim a deduction on the full amount of your contribution, no matter what your annual income or tax filing status is currently. The difference between contributing to a traditional versus a Roth account is you are using pre-tax dollars for traditional contributions and post-tax dollars for Roth ESRP contributions. Contributions using pre-tax dollars allow you to claim the deduction now and be taxed on your withdrawals later. Alternatively, if you contribute to a Roth account using post-tax dollars, all growth and contributions grow tax-free, but you are not able to claim a tax deduction. This is also true of Roth and traditional IRAs.

This is where things can get confusing. If you are covered by an ESRP and make more than $89,000 as a single filer or more than $146,000 as a joint filer, you will not be able to claim any deduction for contributing to a traditional IRA. If you don’t have the option to contribute to an ESRP, you can claim a deduction on your contributions to an IRA, but there are a few limitations on income, which you can see here.

IRA vs. 401(k)? We’re Here to Help.

Your retirement plan plays a major role in how your wealth grows, and ultimately how well you can enjoy the lifestyle you envision in your later years. Since there are no second chances with retirement, choosing the right strategy can feel overwhelming. If you’re uncertain whether you’re taking full advantage of your retirement options, now is the time to get clear.

At Comprehensive Advisor, we help our clients make confident, informed decisions about their retirement planning, including decisions around IRAs and 401(k)s. We offer a full suite of financial services, tailored to your personal goals and circumstances. Our process is deeply personal and we take the time to understand your needs, apply our seasoned experience, and recommend strategies with your best interest in mind.

When you work with us, we help you assess your retirement accounts, navigate contribution limits, and build a strategy that optimizes your long-term potential. Let’s confirm your future is on track. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to schedule your consultation.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial strategies for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a comprehensive retirement roadmap to help ensure their assets are preserved and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Insurance products are offered through the insurance business C.A. Financial & Insurance Services. Comprehensive Advisor, LLC is an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by C.A. Financial & Insurance Services are not subject to investment Advisor requirements. CA Ins. Lic. #6000262. AEWM and C.A. Financial & Insurance Services are not affiliated companies. Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 3108239 – 6/25