401k is a workplace-sponsored retirement savings vehicle , and it lets you make contributions on pre-tax basis (i.e., the contributions come out of your paycheck before Uncle Sam grabs any, and grows tax deferred, but then you pay taxes on all the funds you withdraw in retirement). A Roth IRA is an individual retirement account that you can open on your own, with already taxed dollars. All earnings in this account are tax free, provided you save them for retirement.  In addition,  since Roth-IRA contributions are made with after-tax dollars, you can take back your original contributions at any time, without interest or penalty, making this a very flexible way to save. For 2013, you can contribute up to $5,500 a person to a Roth IRA provided your adjusted gross income is below $112,000 for a single or $178,000 for a married couple. Above that, the amount you can put in shrinks, and no contributions can be made if  a single makes more than $127,000 or a couple more than $188,000.

In addition to flexibility, the Roth IRA gives you tax diversification. In retirement, you’ll have to pay ordinary income taxes on all the money you take out of a pre-tax  401k, but can tap your Roth IRA tax free..