A 401(k) is a retirement savings account offered through your employer, named after the section of the tax code that created it. Money you contribute comes out of your paycheck before income tax is calculated, which lowers your taxable income for the year and lets the contributions grow tax-deferred until you withdraw them in retirement. * The feature that makes 401(k)s especially valuable is employer matching — and it's remarkably common. Roughly 98% of companies that offer a 401(k) match employee contributions to some degree. The most typical formula matches dollar-for-dollar on the first 3% of your salary you contribute, then 50 cents on the dollar for the next 2%, meaning an employee contributing 5% effectively gets another 4% added on top from their employer. * That match isn't automatically yours to keep the moment it lands in your account, though. Your own contributions are always fully vested immediately — that money is yours no matter what. Employer match money can be subject to a vesting schedule, requiring you to stay employed a certain number of years before you own 100% of it. Leave too early, and you can forfeit part of the match you thought you'd already earned. * Once contributed, your 401(k) money gets invested according to choices you make from a menu of funds your employer's plan offers — often mutual funds or target-date funds that automatically adjust their risk level as you approach retirement age. * Because contribution limits, matching formulas, and investment options all vary by employer and change periodically, checking your specific plan's summary plan description is the only way to know your exact numbers.