What Is 401(k)?
A US employer-sponsored retirement plan with tax advantages and often an employer match.
Definition
A 401(k) is a workplace retirement account named for the IRS code section. Employees defer pre-tax salary into the account, lowering current taxable income. The money grows tax-deferred and is taxed as ordinary income when withdrawn after age 59½. Many employers match a percentage of your contribution, free money. 2026 contribution limit: $23,000 ($30,500 if 50+). A Roth 401(k) variant uses post-tax money but grows tax-free.
Example
Contributing 6% of a $80,000 salary ($4,800/year) with a 50% employer match adds another $2,400 of free money each year.
Use It
Try the 401(k) CalculatorRelated Terms
Roth IRAA retirement account funded with post-tax dollars that grows and withdraws tax-free in retirement.Traditional IRAA retirement account funded with pre-tax dollars that defers taxes until withdrawal in retirement.Compound InterestInterest calculated on both the original principal and the accumulated interest from prior periods.