What is a 401(k) retirement plan?

A 401(k) retirement plan is a tax-advantaged savings option typically offered by employers to help employees save for retirement. It allows employees to contribute a portion of their salary to the plan before taxes are deducted, which can significantly reduce their taxable income for the year. This means that contributions, as well as any investment earnings, grow tax-deferred until the employee withdraws the funds during retirement, at which point they will be subject to income tax. Employers may also choose to match employee contributions up to a certain percentage, which can further increase retirement savings. The matching contributions effectively provide additional benefits to employees without impacting their own contributions. There are specific rules regarding contribution limits, withdrawal penalties, and age restrictions that individuals must consider. For instance, individuals typically cannot withdraw funds without penalty until reaching the age of fifty-nine and a half. The funds can be invested in various options within the plan, including stocks, bonds, and mutual funds, allowing for diversified investment strategies to suit individual retirement goals. For information on specific plans and options, individuals may find it helpful to check Prudential's website for detailed resources and contact information.