• A 401(k) plan is a company-sponsored retirement account that employees can contribute income to and employers can contribute to.

  • There are two main types of 401(k)s—traditional and Roth—which differ primarily in how they are taxed.
  • In a traditional 401(k), employee contributions are pre-tax, meaning they reduce taxable income, but cash withdrawals are tax-deductible.
  • Employee contributions to Roth 401(k)s are made on after-tax income: there is no tax deduction in the year of contribution, but withdrawals are tax-free.
  • Under the CARES Act, withdrawal rules have been relaxed for those impacted by the COVID-19 pandemic and required minimum distributions have been suspended for 2020.