What is a 401(k) plan?

A 401 (k) plan is a company-sponsored retirement account in which employees can contribute a percentage of their income. Employers often offer to match at least some of these contributions. There are two basic types of 401 (k)s—traditional and Roth—which differ primarily in how they're taxed.

Who is eligible for an individual 401(k) plan?

An Individual 401 (k) plan is available to self-employed individuals and business owners, including sole proprietors, owner-only corporations, partnerships, and independent consultants with no employees other than a spouse. What are the benefits of an Individual 401 (k) plan? Every Schwab account comes with one-on-one investment help and guidance.

What is a 401(k) & how does it work?

Named for the tax code section that created it, a 401 (k) is an employer-sponsored retirement savings plan with special tax benefits. (The exact tax advantages depend on which kind of 401 (k) contributions you make—more on that later.) Employers typically offer 401 (k)s as part of a benefits package to attract and retain workers.