There are two main types of 401(k) contributions: Traditional and Roth.nnTraditional 401(k): Employees contribute a portion of their pre-tax income, which is then invested in various options such as stocks, bonds, and mutual funds. The contributions grow tax-deferred until withdrawal during retirement, at which point they are taxed as ordinary income. nnRoth 401(k): This retirement savings account allows employees to contribute after-tax income, meaning the withdrawals in retirement are tax-free. This type of 401(k) works similarly to a traditional 401(k) but with the tax advantage of tax-free withdrawals in retirement. It offers an excellent option for those who expect to be in a higher tax bracket in retirement or want to diversify their tax exposure in retirement.