Loading...
Loading...
The most powerful retirement account most employees never fully use.
A 401(k) is a retirement savings account offered by your employer. You choose how much of your paycheck to contribute (up to IRS annual limits), and that money gets invested in funds you select — typically a mix of stock and bond mutual funds or index funds.
The big advantage: contributions come out of your paycheck before taxes. If you earn $60,000 and contribute $6,000, you only pay income tax on $54,000 that year. Your money then grows tax-deferred until retirement.
Money is taken from your paycheck before income taxes are applied, lowering your taxable income for the year.
Many employers match a portion of your contribution — this is essentially a 100% instant return on that money.
Investments inside your 401(k) compound over time without being reduced by annual capital gains or dividend taxes.
Starting at age 59½ you can withdraw funds. Withdrawals are taxed as ordinary income at your then-current tax rate.
| Who | Annual Limit |
|---|---|
| Under age 50 | $23,500 |
| Age 50–59 or 64+ (catch-up) | $31,000 |
| Age 60–63 (super catch-up) | $34,750 |
* Limits are set by the IRS and typically adjust each year for inflation.
Key Insight
If your employer matches 50% of contributions up to 6% of your salary, contribute at least 6%. Anything less means you're leaving free money on the table — that match is part of your compensation.
An employer-sponsored retirement savings plan that lets you contribute pre-tax dollars, reducing your taxable income today.
You don't pay taxes on contributions or growth now — only when you withdraw the money in retirement.
Free money your employer adds to your 401(k) based on how much you contribute — typically 50%–100% up to a certain percentage of your salary.
The timeline that determines when employer contributions officially become yours. You always own your own contributions immediately.
Quick Summary