Individual retirement accounts and 401(k) plans share many features in common, but they also have subtle differences. Not knowing the nuances can raise a tax bill—sometimes by a lot.

Both IRAs and 401(k)s are tax-favored retirement accounts, and with the demise of traditional pensions people have turned to them to save for their golden years. At the end of 2018 such accounts held $16.3 trillion in assets, nearly triple the $5.6 trillion total in 2000, according to the Investment Company Institute.

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