401(k) — Financial Glossary
Definition: An employer-sponsored retirement savings plan that allows employees to save and invest a portion of their paycheck before taxes.
What is a 401(k)?
A 401(k) is a tax-advantaged retirement savings plan offered by employers. You contribute a portion of your pre-tax salary, which reduces your taxable income. Many employers also offer a matching contribution — essentially free money.
Key details for 2026
| Feature | Detail |
|---|---|
| Contribution limit | $23,500 (under 50) |
| Catch-up contribution | $7,500 (age 50+) |
| Employer match | Varies (common: 50% up to 6%) |
| Early withdrawal penalty | 10% + income tax (before 59½) |
| Required minimum distributions | Start at age 73 |
Traditional vs. Roth 401(k)
Traditional: Contributions are pre-tax; you pay taxes when you withdraw in retirement.
Roth: Contributions are after-tax; withdrawals in retirement are tax-free.
Use our Investment Calculator to project your 401(k) growth over time.