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401Ks are retirement plans provided by employers that allow their employees to deduct a portion of their monthly paycheck to be put into tax-deferred account, which is selected by the employer. Restrictions are set about how and when an employee can withdraw money from their 401K, and penalties may occur if assets are prematurely drawn out of the account.

Many companies will match their employee’s 401K contributions from 10% to 100% annually. Employees generally have options regarding where they can invest their 401K, which includes stock or bond mutual funds, money markets, or company stock. These plans are usually more favored by companies because they are less expensive than pension plans.