What Is a 401(k) and How Does It Work? | Master Money Video

What Is a 401(k) and How Does It Work?

A 401(k) is a retirement account you open through your employer.

It lets you invest before taxes are taken out of your paycheck, which means you save more and pay less in taxes today.

Here’s how it works:

👉 You contribute: You choose how much of your paycheck to invest. In 2024, you can contribute up to $23,000 if you're under 50.

👉 Your employer may match: Many companies offer a match — that’s free money. Don’t leave it on the table.

👉 It grows tax-deferred: Your investments grow without being taxed every year. You’ll pay taxes when you withdraw in retirement.

👉 Withdraw at 59½: That’s when you can start taking money out without penalties.

Start early. Invest consistently.

Let the 401(k) carry you to retirement.

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