401(k)
A 401(k) is a retirement investing account offered by an employer. It lets you invest automatically from your paycheck, and many employers add extra money through a match.
What Is a 401(k)?
A 401(k) is an account you usually get when you have a full time job. You choose a percent of your paycheck to contribute, and the money is invested for your future.
The simple version:
Your job sends part of your pay into an investing account, and you build a retirement fund over time.
The Best Feature: Employer Match
Many employers match part of what you contribute. Example: you contribute 4 percent, and they add 4 percent. That is an instant 100 percent return on that portion.
A common rule is to contribute at least enough to get the full match. If you skip it, you are leaving free money on the table.
How a 401(k) Gets Invested
Your 401(k) is an account, not an investment itself. Inside it, you usually choose from a list of mutual funds or target date funds.
Target date fund: the simplest option, it automatically adjusts risk over time
Index funds: low cost funds that track the market
Bond funds: usually lower risk and lower return than stock funds
What to Watch Out For
It is meant for retirement
A 401(k) is designed for long term investing. Taking money out early can trigger taxes and penalties. You should treat it like a vault for future you.
Teen friendly rule:
When you get your first real job, aim for the match first, then increase slowly over time.
Key Takeaway
A 401(k) is one of the best wealth building tools because it is automatic, long term, and often includes an employer match. If you ever have access to a match, getting it is one of the smartest money moves you can make.