How a 401(k) Works

A 401(k) is an employer-sponsored retirement account that lets you contribute a portion of your paycheck before taxes, lowering your taxable income today.

Employer match

Many employers match part of your contribution — often 50% up to 6% of your salary. That match is effectively free money and one of the strongest reasons to contribute at least enough to capture the full match.

Contribution limits and growth

Contributions grow tax-deferred: you pay no tax on gains until you withdraw in retirement. Annual contribution limits are set by the IRS and updated each year.

This guide is educational and does not constitute financial advice.