401(k)s

Like an IRA, a 401(k) account enables you to save and invest for retirement with no current taxation either on the money you set aside or on the profits that accumulate over the years. You pay taxes on the money in your account only when you withdraw it after retirement.
The main difference is that your employer must sponsor your 401(k) account. Most for-profit companies today offer 401(k) plans; in fact, the 401(k) plan has become the most common substitute for the traditional company-paid pension plan, which fewer and fewer firms now provide. As soon as you start any new job, ask about whether your employer offers a 401(k) plan and how you can begin to participate. Generally, this kind of plan is a wonderful deal for you. You can usually save any amount up to 10% or 15% of your salary, tax-free, with the money automatically deducted from your paycheck. (And,, this form of automatic saving is a great way to make regular investing a habit.)
Many employers match all or part of the employee contribution:
For example, if you set aside 10% of your weekly paycheck for your 401(k) account, your company may kick in half that amount on top of your own contribution. You can invest your 401(k) money in any investment vehicle offered by your employer. Most companies today make arrangements with large financial firms, including mutual fund companies, to provide an array of investment choices for their employees.
You’re likely to have stock funds, bond funds, money market funds, and other options to choose from, and you can divide your contributions among two or more fund types if you want. You receive regular statements about the growth of your account, just as with any mutual fund or brokerage account. If you leave your job, you will probably have the option of maintaining your 401(k) account, letting your money continue to grow tax-free until you retire. However, if you choose to receive the money in your account instead, you have to pay taxes and an IRS penalty on it — unless you roll your investment over into a rollover IRA, a new 401(k), or another type of tax-deferred account. Any fund company, broker, banker, or other financial professional can help you with the paperwork and other details.
A 403(b) is a similar type of account offered to employees of nonprofit organizations — schools, hospitals, and so on. If you have the option of participating in a 401(k) or 403(b) plan at your place of work, sign up as soon as you can. For almost every investor, these plans are a great way to grow your money tax-free, usually with help from your employer. Your 401(k) account can become the backbone of your savings plan for a happy and secure retirement.