401(k)
A workplace retirement plan funded from your paycheck.
A 401(k) is a retirement plan offered by US employers. A percent of each paycheck goes in automatically, usually before income tax.
How it works
You choose a contribution percent and how to invest it, often from a short menu of funds. Many plans also offer a Roth 401(k) option, taxed now and tax-free later.
Because money goes in every pay period, a 401(k) is dollar-cost averaging on autopilot.
The rules
There is a yearly contribution limit, and taking money out before age 59½ usually triggers taxes plus a 10% penalty. If your employer offers a match, contributing enough to get the full match is usually the first priority.