human
Can you explain how a 401(k) works?
assistant
A 401(k) is an employer-sponsored retirement savings plan. It’s typically offered as part of an employee’s benefits package, and allows workers to save money on a pre-tax basis before it is deposited into the account. Contributions are made by the employee, and the company may match some or all of those contributions. The funds in the 401(k) can be invested in stocks, bonds, mutual funds, annuities, and other investments. Withdrawals from the account prior to retirement age are subject to income taxes and penalties. After retirement age, withdrawals are tax-free.