What is 401(k) Plan?

In the U.S., a 401(k) is an employer-sponsored, government-supported pension savings plan for employees. 401(k) plans allow companies to sponsor eligible employees in saving and investing towards retirement by contributing a portion of their income to the plan on a tax-deferred basis. These contributions are often incentivized by employer matching. 401(k) plans are typically defined by contribution limits, tax advantages, and early withdrawal penalties.