401(k)

Investing

A 401(k) is an employer-sponsored retirement plan where employees contribute pre-tax salary that grows tax-deferred until withdrawal. The 2026 employee contribution limit is $24,000 ($31,000 if age 50+). Most employers match a percentage of contributions (typically 50% of the first 6%) — always contribute enough to capture the full match (free money). Investments are limited to the plan's menu, typically target-date funds and index funds. Withdrawals after 59½ are taxed as ordinary income; earlier withdrawals incur a 10% penalty plus tax. Roth 401(k) options (after-tax contributions, tax-free growth) are increasingly common.