A 401(k) Seems Like the Superior Retirement Account -- Until You Realize You Can Do These With an IRA

By Stefon Walters – Apr 11, 2026 at 11:00PM ESTKey PointsYou can invest in any stock or ETF in an IRA that you could invest in with a standard brokerage account.IRAs allow penalty-free early withdrawals for first-time homebuyers and qualified higher education expenses.You should keep in mind the opportunity costs of withdrawing early from a retirement account.There are plenty of things to like about 401(k) accounts, including their hands-off nature, company matches, and the ability to lower your taxable income. For many Americans, they're synonymous with saving for retirement, which makes sense because it's by far the most widely used retirement account type in the Unites States. A 401(k) is great, and rightfully the main retirement account people use, but an individual retirement account (IRA) is an underrated option that can supercharge your retirement savings and offer a bit more flexibility than your 401(k) does. Image source: Getty Images. More investment freedom When you first start a job and open a 401(k), you'll need to decide how you want your money invested. Typically, your plan administrator provides you with options to choose from. This may be ideal for someone who prefers a more hands-off approach. However, if you want more control over where your funds go, this could be limiting. Suppose you saw the artificial intelligence boom coming years ago and wanted to add Nvidia to your portfolio. Unless you worked for the company, you likely wouldn't be able to invest in it in your 401(k). Or suppose you've been a big tech believer and want to invest in the Vanguard Information Technology ETF. There's a good chance you can't in your 401(k). This isn't the case with an IRA. You can invest in essentially any stock or exchange-traded fund (ETF) you can invest in with a standard brokerage account. This gives you the freedom to invest in individual stocks, niche ETFs you may be interested in, or whatever stocks you feel truly fit your goals, risk tolerance, and time horizon. More early-withdrawal freedom Typically, when you withdraw from a retirement account before the set age, you'll face a 10% early withdrawal penalty. Both 401(k)s and IRAs allow you to make certain withdrawals without penalty. These include withdrawals for birth or adoption, disability, unreimbursed medical expenses, or disaster recovery. A plus for IRAs is the exemptions they include that a 401(k) doesn't. You can withdraw early from your IRA to pay higher-education expenses, such as tuition, books, and student fees. First-time homebuyers can withdraw up to $10,000 to put toward costs such as the down payment or closing costs. You can withdraw funds to pay for health insurance premiums while you're unemployed. Regardless of the reason, if you're withdrawing from a 401(k) or traditional IRA, you'll also owe taxes on the amount. Clutch, but not a crutch When you contribute to a retirement account, you ideally want it to stay there until retirement. But having the option to withdraw funds early for certain life events is helpful in many instances. It's better to keep money in your IRA because it will ideally be worth more down the road. But we all know that life is unpredictable, and when it does, it's nice to have the option. Read NextApr 11, 2026 •By Selena MaranjianIf You're 50 or Older, You Can Still Put $8,000 Into a 2025 IRA Before April 15Apr 11, 2026 •By James BrumleyHow to Use a Roth Conversion to Protect Your Heirs From a Big Tax BillApr 11, 2026 •By Maurie BackmanThink Higher Gas Prices Won't Impact Your Retirement? Think Again.Apr 11, 2026 •By Maurie BackmanWorking While on Social Security? Here's a Key Rule Retirees Need to KnowApr 11, 2026 •By Bram BerkowitzAs the April 15 Deadline Approaches, the IRA Is One of the Most Overlooked Tax Breaks in Retirement PlanningApr 11, 2026 •By Selena MaranjianThis Proposal Could Spell Disaster for Your MedicareAbout the AuthorStefon Walters is a contributing Motley Fool stock market analyst covering publicly traded companies across technology, consumer goods, and financials, as well as retirement planning. Stefon is a published author and has more than a decade of experience teaching financial literacy. He holds a bachelor’s degree in economics from the University of North Carolina at Chapel Hill.TMFStefonW