A 401(k) is a retirement savings plan sponsored by an employer that lets you save and invest a piece of your paycheck before taxes are taken out.
401(k) plans are named for the section of the tax code that governs them. They arose during the 1980s as a supplement to pensions. Unlike pension funds, you control how your money is invested with a 401(k). Most plans offer a spread of mutual funds composed of stocks, bonds, and money market investments. While a 401(k) can help you save, they do have certain restrictions you should be aware of. A 401(k) gives you more control of your savings and helps you get a little closer to your retirement dreams.