The Basics: Contributing to Your 401(k)
As we explained in Chapter 1, a 401(k) is a tax-deferred account similar to an IRA (see Chapter 3), with a couple of important exceptions: you contribute to your 401(k) directly from your paycheck, and the money you contribute is pretax regardless of your income. These features make 401(k)s a little easier to manage than IRAs.
Your employer has gone through the trouble to set up the account and has selected a variety of investments for you to pick from. Your contributions are easily made from your paycheck, and you don’t need to keep track of eligibility rules and caps on deposits; your employer does that for you.
But you can contribute to the 401(k) only while working for your current ...