Verbull Word of the day
Finance glossary

401(k)

Personal Finance · beginner
Definition

A U.S. employer-sponsored retirement savings plan with tax advantages.

A 401(k) lets employees contribute pre-tax income to investments that grow tax-deferred until withdrawal in retirement. Many employers match a portion of contributions, which is essentially free money. Annual limits apply, and early withdrawals usually incur penalties.

In a sentence

He contributed enough to his 401(k) to capture the full employer match, essentially free money.

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