InvestorWords.com

401(k) plan

Definition

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.

Featured Tip

IRAs are not EnoughWhile the tax-deferred compounding of the IRA may have a powerful impact on the growth rate of your savings, you may need to increase your savings in other ways also. For example, if you are still wor ... Read more