What Is 401(k)?
From the SB Advisors Academy money glossary · Free, no signup
An employer-sponsored retirement savings account that lets you invest pre-tax dollars, reducing your taxable income today while growing tax-deferred until retirement.
A worked example
You contribute 6% of your $60,000 salary to a 401k, that is $3,600 per year. Your taxable income drops to $56,400, and your employer may match some of your contribution.
Category
Part of the "Taxes" group in the money glossary.