What is a 401(k)?

A 401(k) is a defined contribution plan used in the USA. The US government allows employees to make tax free savings for retirement using a 401(k) plan. Not all US employees have access to a 401(k).

A 401(k) is a defined contribution plan It is used in the USA, and is a benefit offered by employers to their US workers. The US government allows employees to make tax free savings for their retirement using a 401(k) plan. These savings can be directed into investments listed in the plan, and employees can withdraw the funds once they’ve reached the age of 59 and a half years. (However, you must be aware that employees can withdraw funds under certain special provisions, or if they’re willing to pay a penalty for early withdrawal). Not all US employers offer 401(k) plans – some will match a certain percentage of an employee’s contribution instead, or offer alternative benefits.

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