what is the main benefit of a 401 k 
a 401 k plan lets you reduce your tax burden while saving for retirement not only do you get tax deferred gains it s also hassle free since contributions are automatically subtracted from your paycheck many employers will match part of their employee s 401 k contributions effectively giving them a free boost to their retirement savings the bottom linea 401 k plan is a workplace retirement plan that allows you to make annual contributions up to a specific limit and invest that money for your later years after your working days are over there are two types of 401 k plans traditional or roth the traditional 401 k involves pretax contributions that give you a tax break when you make them and reduce your taxable income however you pay ordinary income tax on your withdrawals the roth 401 k involves after tax contributions and no upfront tax break but you won t pay taxes on your withdrawals in retirement both accounts allow employer contributions that can increase your savings 