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401k
(Employer-Sponsored Retirement Plan)
A 401k is a U.S. employer-sponsored retirement plan where employees contribute pre-tax earnings (up to $22,500 in 2023, with $7,500 catch-up for ages 50+), often with employer matching (e.g., 50% of contributions up to 6% salary).
Funds grow tax-deferred until withdrawal in retirement, when they’re taxed as income. Some plans offer Roth 401k options (like Roth IRAs) for tax-free withdrawals. Early withdrawals face 10% penalties plus taxes, with exceptions like hardship loans. Unlike IRAs, 401ks have higher contribution limits and may include employer stock options. The DOL mandates fiduciary oversight to protect investors from high fees.
Funds grow tax-deferred until withdrawal in retirement, when they’re taxed as income. Some plans offer Roth 401k options (like Roth IRAs) for tax-free withdrawals. Early withdrawals face 10% penalties plus taxes, with exceptions like hardship loans. Unlike IRAs, 401ks have higher contribution limits and may include employer stock options. The DOL mandates fiduciary oversight to protect investors from high fees.