401(k)
InvestingAn employer-sponsored retirement savings plan that allows employees to contribute pre-tax income, often with employer matching.
Example
Example: You earn $80,000 and contribute 10% ($8,000/year) to your 401(k). Your employer matches 50% up to 6%, adding $2,400/year in free money. At the 22% tax bracket, your $8,000 contribution only reduces your take-home by $6,240 because of the tax savings. After 30 years at 8% average return, your contributions plus match grow to approximately $1,250,000. Use our 401(k) calculator to model your situation.