What is a 401k and how does employer matching work?

A 401k is a retirement savings account offered by employers in the United States that lets you contribute a portion of your paycheck before taxes are taken out. Your money grows tax-deferred, meaning you only pay taxes when you withdraw it in retirement. In 2024, you can contribute up to $23,000 per year. Employer matching is when your company contributes additional money to your 401k based on what you put in. A common example is a 50% match up to 6% of your salary, meaning if you earn $60,000 and contribute 6% ($3,600), your employer adds another $1,800. Some employers match dollar for dollar. Most companies require you to stay employed for a set period before you fully own those matched funds, which is called vesting.