What is a "401(k)" plan?

A 401(k) plan is indeed a retirement savings plan that is sponsored by an employer, primarily allowing employees to save and invest a portion of their paycheck before taxes are taken out. This type of plan features various investment options, typically including mutual funds, stocks, and bonds, enabling employees to grow their savings over time for retirement.

One of the key advantages of a 401(k) plan is the potential for tax-deferred growth, meaning that the money invested can appreciate without being taxed until it is withdrawn during retirement. Many employers also offer matching contributions, which can significantly increase the employee's retirement savings.

In contrast, the other options do not correctly define a 401(k) plan: a health savings account is specifically designed for medical expenses; an investment plan for real estate is unrelated to retirement accounts; and a savings plan for tuition expenses serves an entirely different purpose. Thus, the correct understanding of a 401(k) is crucial for making informed decisions about retirement savings and investment strategies.