401(k)

Definition

A type of savings account made possible by federal law.  By creating a financial plan under 26 U.S.C. 401(k), employers can help their workers save for retirement while reducing taxable income.  Workers can choose to deposit part of their earnings into a 401(k) account on a pre-tax basis.  Furthermore, interest earned on money in a 401(k) account is never taxed before funds are withdrawn.

See also