401(k)
Financial term in the Retirement category
Definition
A tax-advantaged retirement savings plan offered by employers that allows employees to contribute a portion of their salary before taxes. Many employers offer matching contributions up to a certain percentage.
Related Terms
Roth IRA
A retirement account where contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. Particularly beneficial for younger investors.
Compound Interest
Interest calculated on both the initial principal and accumulated interest from previous periods. Often called 'interest on interest,' it's a powerful force for growing wealth over time.
Frequently Asked Questions
What is 401(k)?
A tax-advantaged retirement savings plan offered by employers that allows employees to contribute a portion of their salary before taxes. Many employers offer matching contributions up to a certain percentage.
Why is 401(k) important in personal finance?
401(k) is an important retirement concept that helps individuals make better financial decisions. Understanding 401(k) can improve your financial planning and help you achieve your money goals.
How does 401(k) relate to Roth IRA?
401(k) and Roth IRA are related financial concepts. A retirement account where contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. Particularly beneficial for younger investors.
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