Final answer:
IRA account distribution rules are similar to those of traditional 401(k) accounts, being tax-deferred, but differ from Roth IRAs, which are funded with after-tax income and allow tax-free withdrawals. Traditional IRAs are set up individually, whereas 401(k)s are employer-sponsored.
Step-by-step explanation:
The distribution rules for IRA accounts are similar to the rules for traditional 401(k) accounts. This means that both types of accounts are tax-deferred, meaning the contributions are made before taxes but distributions taken after retirement are taxed as income. While a traditional IRA is an individual retirement account that allows individuals to direct pretax income toward investments that can grow tax-deferred, a 401(k) is a type of employer-sponsored retirement plan where both the employer and employee can make contributions. The primary distinction is that a traditional IRA is set up by an individual, whereas a 401(k) must be established through an employer. Both offer tax advantages, as the investments made with these plans grow tax-free until withdrawn during retirement.
Additionally, Roth IRAs have different rules compared to traditional IRAs and 401(k)s. Contributions to a Roth IRA are made with after-tax income, which means that the withdrawals, including earnings, are tax-free during retirement, provided certain conditions are met. Unlike traditional IRAs and 401(k)s, Roth IRAs do not require minimum distributions after reaching a certain age, allowing for more flexibility and potential tax-free growth.