In the most basic terms, a 401(k) plan is a financial investment that allows a saver to defer the payment of taxes in various types of investments until the money is withdrawn, typically when the worker retires at the age of 65.  The account is set up by an employer and very often contributed to by them.  

![triangle-3125882_640.jpg](https://images.hive.blog/DQmSxz2DZQpicpxzLQnvw2YYSuZq1RfUmKfiMuuwSsdar3b/triangle-3125882_640.jpg)

### Minimum Age to Withdraw

The funds are off-limits until retirement, but people may begin drawing on their 401(k) funds without penalty when they're 59 ½ years old or older, according to IRS regulations. 

### Deferred Contribution Plan

The IRS lists the 401(k) as one of several types of “deferred contribution plans” where a set proportion of pre-tax earnings are contributed to the plan along with untaxed matching funds from the company.  You still have to pay Medicare, FICA, Unemployment and Social Security taxes on your gross income, but you don't have to report matching contributions as income.

The types of 401(k) plans have grown over the years with seven different plan options now in existence.  They became available to small business owners, charitable organizations and even sole proprietors, amongst others.
We’ll define all seven types later in this chapter, but the focus will be on the traditional 401(k) as this is the most widely used plan.  If you work for an employer that offers a plan this is the type you most likely have.  

Within the traditional employee based 401(k) are two options; participant directed and pooled plans.  

The next 401(k) post will describe these two types.

Posted Using [LeoFinance](https://leofinance.io/@scaredycatguide/scaredycatguide-to-the-401-k-defining-the-401-k-plan)