What is 401(k) Plan?
Definition A 401(k) is an employer-sponsored retirement plan that lets employees contribute a portion of their pay, often with an employer match. Contributions can be traditional (pre-tax, reducing current income) or Roth (after-tax, for tax-free qualified withdrawals), up to annual limits set by the IRS. Investments grow tax-deferred until withdrawal.
It is the primary retirement vehicle for most employees, and maximizing contributions and any match is one of the most reliable tax and savings moves.