So you’re interested in an overview of 401(k) plans.
A 401(k) plan is a special type of investment account, offered by employers and designed to help you save for retirement.
You contribute money to your 401(k) plan through pre-tax payroll deductions. In other words, the money comes straight from your paycheck.
Once the money is in the 401(k) plan, you can then allocate it to different investments, depending on your plan. Usually, you can choose from a number of different mutual funds, including money market funds, bond funds, and stock funds.
Here’s the best part: While your money is in the 401(k) plan, any interest, dividends and capital gains on your investments aren’t taxed.
In fact, the money grows, untaxed, until you withdraw it in retirement. At that point, you pay income taxes on withdrawals at your regular income tax rate.
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