401(k) Retirement Plan


 

Taking its name from subsection 401(k) of the Internal Revenue Code (Title 26 of the United States Code), the 401(k) is a type of “defined contribution” retirement savings account. Contributions are "tax-deferred"—deducted from paychecks before taxes, and then taxed when a withdrawal is made from the 401(k) account. Depending on the employer's program, a portion of the employee's contribution may be matched by the employer. 

In 2017, the maximum contribution and employee can make is $18,000. For employees over 50 years old, and additional “catch-up” contribution of $6,000 may be made. Total annual contributions are limited to $54,000 or 100% of annual earnings (whichever is lower).