401(K)
Save through your workplace.
A 401(k) is an employer-sponsored retirement plan that lets employees contribute a portion of their paycheck toward long-term savings, often alongside an employer match.
HOW IT WORKS
Contributions are deducted directly from payroll and invested according to the options your specific plan offers. Depending on the plan, contributions may be made on a pre-tax or after-tax (Roth) basis, which affects how withdrawals are taxed later.
Potential advantages
Contributions happen automatically through payroll, which removes a common barrier to consistent saving.
Many employers offer a matching contribution, which can meaningfully increase what's set aside each year.
Tax-advantaged growth allows contributions to compound without annual tax drag on gains.
Important considerations
Investment options are typically limited to whatever menu your specific plan offers.
Early withdrawals are generally restricted and may carry tax consequences.
Vesting schedules can affect how much of an employer match you keep if you leave before you're fully vested.
Who typically uses it
Employees of companies that sponsor a plan, particularly those with access to an employer match — often the first place a workplace retirement strategy starts.
Planning considerations
How a 401(k) fits alongside other accounts depends on your employer's match, your plan's investment menu, and how it complements any IRAs or taxable accounts you also hold.
This page is educational and does not constitute personalized tax, legal or investment advice, and does not assume every reader qualifies for this account type. Contribution rules, income limits and tax treatment are set by current IRS rules and change over time — consult a qualified tax or financial professional before acting.
FAQ
Common questions
What happens to my 401(k) when I change employers?
Plans typically offer options such as leaving the balance with the former employer's plan, rolling it into a new employer's plan, or rolling it into an IRA. The right choice depends on the specific plans involved.
Is my employer match guaranteed?
Matching is set by each employer's plan design and can vary or change over time — it isn't a fixed feature every 401(k) plan is required to offer.
RELATED RETIREMENT STRATEGIES
See how this fits your broader plan.
Build an illustrative projection, or explore how UNTU Capital thinks about retirement planning as a whole.