"If I can afford to contribute to either a 401(k) or my IRA but not both, which should I choose and why?" The question is a common one, and the answer depends on your specific situation. One is not inherently better than the other. Both provide tax-deferred growth, and traditional IRAs have the same tax deductibility as 401(k)s. However, there are differences that should be considered in determining which option makes the most sense for your particular situation. Let's take a look at these differences.

• Control. With an IRA, you are in control. You control which financial institution your IRA is with, if you want to move it, and where you would move it to. With a 401(k), these decisions are at the sole discretion of your employer. Here, the advantage goes to the IRA.

• Investment options. IRA's are not investment specific—many different types of investments are allowed within them. Your investment choices usually depend on the financial institution you place your IRA with. For example, if you open your IRA with a bank or savings institution, you'll likely end up in a savings account or CD. These are typical bank products, and will usually return about 5% per year.

If you open it with an insurance company, you may end up in a fixed or variable annuity. These are the products that insurance companies manufacture. A fixed annuity is low risk and a typical return might be 6%-7%, depending on market conditions. Variable annuities have sub-accounts which are managed like mutual funds; however, due to the higher fees, the net returns to investors are not quite as good. For most people, opening an IRA with a bank or insurance company is probably not the best option.

If your IRA is with an investment company, like Fidelity or Vanguard, it will likely be in mutual funds. Investments in a 401(k) plan are usually also in mutual funds. While the stock market generally averages about a 10%-12% return, performance can vary widely, so be careful in picking your investments.

In terms of investment options, neither the 401(k) nor IRA is a clear winner, as both can be invested in mutual funds and get market returns. However, while a 401(k) plan may offer only 6-10 different investment options, with an IRA your options can be virtually unlimited depending on what provider you use. The IRA is clearly more flexible, as you could have a much wider selection of funds to choose from.

• Rules of the game. The rules for participation, contributions, and withdrawals are what truly distinguish an IRA from a 401(k). Much has been written about the strengths and weaknesses of the three types of IRAs—deductible, non-deductible, or Roth, so we won't focus on that here. Just realize that your 401(k) vs. IRA comparison can change dramatically depending on which type of IRA you are eligible for. (Relatively few workers have access to the new Roth 401(k) plans at this point, but as they become more widely available, they'll add another element to the 401(k) vs. IRA debate. For details on the Roth 401(k), see Introducing the Roth 401(k))