I've seen described three main advantages of 401(k)'s over IRAs:
- Employers often match 401(k) contributions.
- If your employer offers a 401(k), then the deductability of contributions to a traditional IRA is limited above certain income levels (in 2008, $73k for single or $121k if married filing jointly). Similarly, contributions to a Roth IRA are limited above $120k or $189k if married filing jointly.
- 401(k)'s have much higher contribution limits.
There are also a few more obscure advantages (I saw some subtle point about lawsuit liability somewhere), but I think those are the main ones. Of course, there are disadvantages as well, such as less investment flexibility and sometimes higher fees.
I understand the first two points, but I don't really understand the third one. Suppose your employer doesn't match contributions and you make less than $73k (or the equivalent income limits mentioned above), which makes the first two points irrelevant. Then can't you just first max out your contributions to an IRA and then make any further investments in your 401(k), thereby getting the best of both worlds? It seems that the only disadvantage here is the slight inconvenience of having to manage two retirement accounts.
(Of course, some people don't feel personally comfortable managing their own investments in an IRA, even if only in index funds, but I'm putting that issue aside.)