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If you can save more than $2000/year, the 401(k) plan is the better way to go.

You are limited to $2,000/year pretax in a traditional IRA. Those limits don't apply to a 401(k).

The limit for 1999 in a 401(k) is the lower of $10,000 year or the plan maximum. The plan maximum is plan specific, but an example would be 15% of pay. (15,000 salary x 15% is $2250) IRS tax savings of 2250x15% + state taxes.

At salary levels below certain dollar levels, if you can afford it, you are allowed to contribute to both.
I don't have the limits memorized, they're in Publ 590 available on the IRS website)

.... The scary part is ..... I know the Publication # .... ;-)
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