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What is the difference between a 401(k) and a 401(b)?
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The primary difference between a 401(k) and a 401(b) is that a 401(k) is an employer-sponsored retirement savings plan, while a 401(b) is a tax-advantaged deferred compensation program. A 401(k) allows employees to contribute pre-tax money from their salary or wages into an investment account, which grows over time tax-deferred. Contributions are typically made through payroll deductions, although some plans allow for direct employee contributions. On the other hand, a 401(b) is an arrangement where employers provide additional benefits to their employees in exchange for the employees agreeing to defer income taxes on those benefits until they are paid out.