What Kind Of Retirement Plan Is A 401K? 
A 401 -LRB- k -RRB- plan is a qualified `` cash or deferred arrangement '' permitted under section 401 -LRB- k -RRB- of the Internal Revenue Code . Essentially , a 401 -LRB- k -RRB- is a retirement plan sponsored by your employer that allows you to defer some of your income -LRB- subject to limits -RRB- into this plan . Some employers will provide matching contributions on top of your salary deferral which will help you to build retirement savings more quickly . By deferring income into a 401 -LRB- k -RRB- plan , you also defer paying taxes on that income . The investments inside of the plan grow on a tax-deferred basis , and you are responsible for taxes when you take the money out of the plan as income -LRB- during retirement -RRB- . 