What is 401(k) plan

A 401(k) plan is a way of saving for your retirement sponsored by your employer. Using this system, your employer will take a designated portion of your paycheck before taxes and add it into a retirement account known as a 401(k).
Many organizations run 401(k) plans to replace pensions. Pensions are expensive to provide and administer, while 401(k)s are really just a way of helping employees to save their own money, costing the employer very little. The staff member controls how their 401(k) is invested and may select where the funds go. They may be placed in bonds, stocks, or other investments.