401(k) programs help people save for their retirement. They allow you to put money into an account that has been designated for 401(k) purposes. These deposits are made through work-related programs, and they are *tax free.* That's right - no state or federal taxes are taken out, and that money is dropped right into your account. What's the catch? You can't withdraw this money until you retire without paying a steep penalty. Also, when you do withdraw it, you will have to pay taxes on it. However, because you didn't pay taxes on it earlier, you've been earning interest on the full amount for all these years, so your nest egg is much larger than it would have been if you had just saved up regular post-tax income. Once your money is in your 401(k) account, you may choose how to invest it and maximize your returns. Most 401(k) programs will offer a set of mutual funds you can choose from, or I believe some will allow you to even invest in stocks. It is possible to withdraw money from your 401(k) account early without a penalty under a few special circumstances such as buying a house, paying emergency medical bills, or putting a child through school. There is also a maximum amount one can contribute to their 401(k) plan each year. Check with your Human Resources or Benefits coordinator to find out how much you can contribute per year.