401(k)

A 401(k) is a retirement savings account offered through an employer, named after the section of the US tax code that created it, that lets workers set aside part of their paycheck before taxes are taken out, lowering their taxable income today while the money grows, untaxed, until retirement. Many employers match a portion of what an employee contributes, effectively free money that's usually described as leaving cash on the table if not claimed. Withdrawals are taxed as regular income once taken out in retirement, and taking money out early usually comes with a penalty.