What is a 401k plan?

A 401k plan allows employees to save for their retirement. The plan is named for section 401(k) of the Internal Revenue Code, which allows employees to set aside tax-deferred funds with each paycheck. It also provides participants with a plenty of flexibility, allowing the employee to regularly change the amount of money they wish to contribute to their plan, and giving them several options to choose from in investing their savings over time. This makes a 401(k) plan different from other pension plans because it does not specify from the onset how much money an employee will receive after retirement.