What type of retirement account is typically offered through an employer and allows for contributions from paychecks before or after taxes?

A 401(k) is a type of retirement account that is commonly provided by employers, allowing employees to save for retirement directly from their paychecks. One of the significant advantages of a 401(k) is that it can allow for both pre-tax and post-tax contributions, depending on the specific plan options offered by the employer.

When contributions are made before taxes, they reduce an employee's taxable income in the year they are made, allowing funds to grow tax-deferred until withdrawal during retirement. On the other hand, if an employee opts for a Roth 401(k) option, contributions are made after taxes, and withdrawals in retirement are tax-free, provided certain conditions are met. This dual approach to taxation gives employees flexibility in how they want to structure their retirement savings.

In contrast, options such as a 403(b) are similar but typically offered in non-profit sectors, while IRAs (both Roth and Traditional) are usually individual accounts and not tied to employer payroll deductions. This makes the 401(k) particularly advantageous for workplace settings, as it encourages systematic savings through automatic deductions from paychecks.