401(k) plan


A defined contribution plan offered by a corporation to its employees, which allows employees to set aside tax-deferred income for retirement purposes, and in some cases employers will match their contribution dollar-for-dollar. Taking a distribution of the funds before a certain specified age will trigger a penalty tax. The name 401(k) comes from the IRS section describing the program.

Use 401(k) plan in a sentence

Anyone who plans on retiring at any point in their life would be smart to set up a 401 plan so they are set at that point and forward.

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Martha was excited about the ability to contribute to the 401 plan at work, which had a company match of up to 6% toward her retirement account.

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The Widget Factory offers its employees a fine retirement 401 plan, and will match contributions up to 5% of their salary, and allow them to defer taxes on that contribution.

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408(k) plan 457 plan