A 401(k) can be defined as a type of compensation (savings) plan that is being sponsored by a business firm or company (employer) to avail its employees the opportunity to contribute into. As a company-sponsored and defined-contribution retirement savings plan, it offers tax advantages to the employees because it reduces their income tax for the particular year while taxing their withdrawals.
Hence, a 401(k) would be the best retirement savings option for a 40-year old engineer whose employer offers a five percent contribution match.
