401(k) plan

A type of retirement savings plan maintained by an employer that allows employees to contribute pretax dollars through salary deferral. Many plans offer a variety of investment options, including stocks, bonds, short-term reserves, mutual funds and company stock, and employers often match a percentage of employee contributions. 401(k) savings grow tax-deferred until they’re withdrawn. If you withdraw 401(k) assets before age 59½, in most cases an additional 10 percent penalty tax will also apply. Source: Vanguard.com

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