401(k)

A 401(k) is a retirement savings plan offered by employers that allows employees to save for retirement while reducing their taxable income. Employees can contribute a portion of their salary to the plan, and the money is often invested in stocks, bonds, or mutual funds. Many employers match a part of the employee's contributions, which is like free money for retirement. The funds grow tax-deferred until withdrawal, typically after age 59½. Early withdrawals may incur penalties. Overall, a 401(k) helps individuals build savings for a more secure financial future during retirement.