A 401(k) is a workplace retirement plan that lets employees contribute a portion of their pay, frequently with an employer matching contribution. Traditional 401(k) contributions are pre-tax with tax-deferred growth; many plans also offer a Roth option.
When you leave an employer, you generally can leave the money in the plan, roll it to an IRA, or move it to a new employer's plan. Each choice has different costs, investment options, and rules.
Example
After retiring, a worker rolls their 401(k) into an IRA so they can choose how to turn the balance into retirement income.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.