401(k).
In plain English
A 401(k) is a retirement account your employer sets up. A percentage of each paycheck is taken out before tax and invested. Many employers also match part of what you put in: that match is free money. In 2026, you can contribute up to $24,500 of your own pay ($32,500 if you're 50+; $35,750 for ages 60-63 under the SECURE 2.0 super catch-up if your plan allows it).
01Why it matters
If your employer offers a match, this is usually the highest-return investment you will ever make. A 100% match on the first 4% of pay is a guaranteed 100% return on that money, before it's even invested.
02The math, step by step
Say you earn $60,000 and your employer matches 50% of your contributions up to 6% of your pay. If you contribute 6% ($3,600/year, $300/month), your employer adds another $1,800. You put in $3,600. You end the year with $5,400 invested. That extra $1,800 is gone if you don't contribute enough to get the match.
03What this is NOT
A 401(k) is through your employer. A Roth IRA you open yourself. They have different contribution limits, and you can have both. The order most experts suggest: 401(k) up to the match → Roth IRA → back to 401(k).
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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