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A 401(k) is a retirement plan sponsored by an employer, offering tax advantages to employees investing money for retirement. Two types of 401(k) plans are the traditional 401(k) and Roth 401(k), which differ in how taxes are assessed.

401(k) plans encourage employees to save money for retirement. Due to tax advantages and company matching of employee contributions, employees can typically save significantly more money in a 401(k) plan than without.

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