<human>: Can you explain how a 401(k) works?
<bot>: A 401(k) is an employer-sponsored retirement savings plan that allows workers to contribute pre-tax money on a regular basis. The contributions are typically made with after-tax income, meaning the worker will pay taxes when they withdraw the funds in retirement. Contributions can come from both the employer and the employee. Generally, employers match a percentage of the employee's contribution up to a certain amount. This type of plan offers employees several advantages, such as tax deferral, potential tax deductions, and potentially higher returns than other investments.