A 401(k) is a savings account that an employer sets up so that employees can easily put money aside for retirement.
Retirement accounts help people save money for later in their lives, so they'll be able to stop working full time when they're older. There are several kinds of retirement plans, but a 401(k) requires an employer's participation. Money is automatically withdrawn from your paycheck and invested, and no taxes are paid until you retire. Some employers also chip in a percentage of your savings. The term 401(k) refers to the specific section of federal tax code addressing retirement plans.