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A 401k is the section of the Internal Revenue Code that allows employees to participate in a retirement savings plan. Contributions to a 401k are tax-deferred, and interest and earnings accumulate on a tax-deferred basis. A 401k retirement plan is an effective and powerful method of saving.

There are various types of 401K plans, from SIMPLEs and SEPs to Roths and thrift savings plans. Each person’s retirement plan needs are different, so you need to figure out your goals first, then determine if you will be able to have the money to achieve all of them.

Some companies and employers will offer a 401k "match," which means the company will invest some or all of the amount that you match into your retirement savings. When starting or accepting a new job, it is important to ask your employer what the 401k plan for that company is.

The early you start investing in your 401k, the better. So even if you can not spare very much, it can be beneficial to contribute early on in your career to your retirement fund.

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