Definition

Noun: A 401(k) is a type of retirement savings plan offered by employers in the United States. It allows employees to save and invest a portion of their paycheck before taxes are taken out. Employers may also contribute matching funds to the employee's account. Taxes on the savings and their investment earnings are deferred until the money is withdrawn in retirement.

Usage

The term 401(k) is used to refer to the specific retirement plan itself or to an individual account within that plan.

Examples: * "She decided to increase her 401(k) contribution this year." * "Does your company offer a 401(k) with a matching contribution?" * "He rolled over his old 401(k) into an IRA after leaving his job."

Advanced Usage

• "To max out one's 401(k)": To contribute the maximum annual amount allowed by law to one's 401(k) account.
  • Example: "Her financial goal is to max out her 401(k) every year."
• "401(k) match": Refers to the money an employer contributes to an employee's 401(k) plan, typically based on the employee's own contributions.
  • Example: "The company offers a generous 50% 401(k) match up to 6% of your salary."
• "Traditional 401(k)" vs. "Roth 401(k)": A Traditional 401(k) uses pre-tax contributions, while a Roth 401(k) uses after-tax contributions, leading to different tax treatments upon withdrawal.

Variants and Related Words

• 401(k) plan: The full, formal name for the retirement plan.
• 403(b): A very similar tax-advantaged retirement savings plan offered to employees of public schools and certain non-profit organizations.
• IRA (Individual Retirement Account): Another type of tax-advantaged retirement account that is not tied to an employer.

Synonyms

• Employer-sponsored retirement plan
• Defined-contribution plan (This is the broader category of retirement plans that includes 401(k)s, where the payout depends on contribution amounts and investment performance.)

Related Phrases

• "To contribute to a 401(k)": To put money into one's 401(k) account.
  • Example: "You should start contributing to a 401(k) as early as possible in your career."
• "To withdraw from a 401(k)": To take money out of one's 401(k) account, typically after reaching retirement age to avoid penalties.
  • Example: "There are strict rules about when you can withdraw from your 401(k) without penalty."
• "To roll over a 401(k)": To transfer the funds from a former employer's 401(k) plan into a new employer's plan or into an IRA.
  • Example: "When he changed jobs, he chose to roll over his 401(k) to keep his retirement savings consolidated."

Noun

1. a retirement savings plan that is funded by employee contributions and (often) matching contributions from the employer; contributions are made from your salary before taxes and the funds grow tax-free until they are withdrawn, at which point they can be converted into an IRA; funds can be transferred if you change employers and you can (to some extent) manage the investments yourself