A 401K is a defined contribution plan offered to employees by their corporation. This plan enables employees to set aside tax-deferred income for retirement purposes. Tax-deferred income, it means that the taxes on the income (contributed toward the retirement account) are delayed for a certain period of time. In some cases,
employers will match the employee’s contribution, dollar-for-dollar. The funds can be withdrawn without penalty tax after the employee has reached an age close to retirement.