Glossary

401(k)

A 401(k) is a type of personal pension plan offered by an employer. It provides tax advantages on money set aside for retirement. An employee asks to have part of his or her salary paid directly, or deferred, into the 401(k) fund. Taxes on contributions to 401(k) plans and the earnings on those contributions are deferred until the money is withdrawn from the plan. At the time money is withdrawn from the plan, it is taxed as regular income. Many employers provide matching contributions to 401(k) plans. If your employer provides a 401(k) match this plan is likely to be one of the best savings opportunities available to you.