A 401(k) is a type of retirement plan offered through your employer. The name of the account actually comes from a section of the Internal Revenue Code—riveting, right?

With a 401(k), contributions are made directly from your paycheck, and your employer may match a portion of those contributions. There is a limit to how much can be contributed each year. For 2022, the total contribution is capped at $61,000/year (that includes employee and employer contributions). If you are over fifty, however, you can contribute $6,500 more per year, making the limit $67,500.

If you withdraw from you 401(k) before you're 59 1/2, you'll probably be required to pay a 10% early-distribution penalty tax in addition to any other taxes (like income tax for a Traditional 401(k)). 

Because a 401(k) is a company-sponsored retirement plan, you may lose access when you leave your current company. If that happens, you can roll your money into an IRA, move your balance to a 401(k) offered by your new employer, or withdraw the money (usually a bad idea unless you urgently need the cash!). Sometimes an employer will allow an employee to keep their 401(k) indefinitely, but you won't be able to contribute to it.