401(k)

Definition

A 401(k) is a retirement savings plan offered by employers that allows automatic paycheck contributions into investment options selected by the plan.

Common contribution options

• Traditional 401(k): Pre-tax contributions; withdrawals taxed later
• Roth 401(k): After-tax contributions; qualified withdrawals may be tax-free

Employer match

Many employers match part of employee contributions, which can significantly boost long-term retirement savings.

Important note

Annual contribution limits and distribution rules apply, and early withdrawals can trigger taxes and penalties.