Home / Education / Glossary / 401(k) Plan

401(k) Plan

A 401(k) plan is a tax-advantaged retirement savings account offered by employers to their employees in the United States. Through a 401(k) plan, employees can contribute a portion of their pre-tax income to a retirement savings account, which is then invested in a variety of assets such as stocks, bonds, and mutual funds.

Employers may also offer matching contributions, providing additional incentives for employees to save for retirement. Funds in a 401(k) plan grow tax-deferred until withdrawal, typically upon retirement, when they are subject to income tax. 401(k) plans are a popular retirement savings vehicle due to their tax benefits and employer contribution.