IRA or 401(k)? 3 lesser-known perks to putting your retirement savings in a 401(k)

It's important to set money aside for retirement throughout your career so you have funds to access later in life. But in the context of retirement savings, you have choices.

Many people opt to save for retirement in an IRA because these plans commonly offer a wide range of investment choices. With a 401(k), on the other hand, you're generally limited to a bunch of different funds to invest in, but you can't hold stocks individually within your plan.

That said, 401(k) plans have their share of benefits. Not only do they offer higher annual contribution limits than IRAs, but many employers that sponsor 401(k)s also match worker contributions to some degree.

But while those may be pretty well-known advantages of 401(k)s, these plans also come with some less obvious perks. Here are three you should absolutely know about so you can make an informed decision on where to house your retirement savings.

1. Funds are more protected from creditors

Under the Employee Retirement Income Security Act (ERISA), creditors are generally not allowed to go after funds from pensions and employer-sponsored retirement plans. An IRA is not an employer-sponsored plan and is therefore not protected under ERISA the same way a 401(k) is.

Now ideally, you won't land in a situation where creditors are coming after your assets to begin with. But in that unfortunate event, you may have a lot more protection with your money in a 401(k).

2. You can sometimes tap your savings penalty-free at age 55

Generally, you'll face a 10% early withdrawal penalty for taking money out of a traditional IRA or 401(k) plan prior to age 59 1/2. But there can be an exception with 401(k)s known as the rule of 55. If you separate from the employer sponsoring your 401(k) during the calendar year of your 55th birthday (or later), you can often take withdrawals from that company's 401(k) without incurring a penalty.

Let's say you're downsized out of a job at age 57 and have enough money in savings to just retire at that point rather than start over again at a new employer. With a traditional IRA, you'd be looking at a 10% penalty for removing funds at 57. But with a 401(k), you may be able to take that money out penalty-free provided you're tapping the plan sponsored by the same employer that just laid you off at 57.

3. The way they're funded makes you more likely to meet your goals

It's definitely not an easy thing to consistently put money into savings, whether in the bank or an in IRA. The nice thing about 401(k) plans is that you're not writing your plan a check every month or transferring money over once you've paid your bills.

Rather, 401(k) plans are funded via automatic payroll deductions. If you sign up to have $300 a month put into your 401(k), that sum will be taken out of your paycheck each month so you don't even miss it. It's this very system that could be instrumental in helping you stay on track with retirement savings.

When it comes to saving for retirement, you clearly have plenty of options. But it certainly pays to consider these little-known 401(k) plan benefits when making your choice.

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