What is a 401(k) Retirement Plan?
The 401(k) is an employer-sponsored retirement savings plan that allows employees to save money for retirement by setting aside a certain percentage of the employee’s paycheck toward contributions. Retirement savings from the 401(k) is tax-deferred, meaning the person is taxed only at the time of withdrawal after age 59-1/2. Effectively, the 401(k) works behind the scenes to build a sizable nest egg by the time the person retires.