Retirement & Savings

What Is a 401(k)?

A 401(k) is an employer-sponsored retirement savings plan in the United States that lets employees contribute part of their paycheck to an investment account with tax advantages. Traditional 401(k) contributions are made before income tax and taxed on withdrawal; Roth 401(k) contributions are taxed now and qualified withdrawals are tax-free.

How a 401(k) Works

Contributions are deducted from each paycheck and invested in options chosen from the plan's menu. Many employers add a matching contribution. The IRS sets an annual employee contribution limit and a higher catch-up limit for older workers, both adjusted over time.

Withdrawals

Withdrawals before age 59½ are generally subject to income tax and a 10% additional tax, with certain exceptions. Plan rules and tax law determine the details.

🧮 Calculate It Yourself

Put 401(k) Plan into practice with these free calculators — no sign-up, nothing stored.

🏦 401(k) Calculator Estimate your retirement savings using real 2026 IRS contribution limits. Calculate → 🏛️ Roth vs. Traditional IRA Calculator Compare the after-tax retirement value of both account types. Calculate → 🔥 FIRE Number Calculator Financial Independence, Retire Early — find your number and timeline. Calculate →

🔗 Related Terms

Employer Match Roth IRA Traditional IRA Compound Interest Health Savings Account (HSA)

More Retirement & Savings Terms

📖 Browse all glossary terms or explore all free calculators.

Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.