A 401(k) plan is a retirement savings plan offered by many employers. There are two main types of 401(k) plans: traditional 401(k) plans and Roth 401(k) plans. With a traditional 401(k) plan, you contribute pre-tax dollars, which means that your contributions are deducted from your paycheck before taxes are taken out. This reduces your taxable income, which can save you money on taxes now. However, when you withdraw money from a traditional 401(k) plan in retirement, you will have to pay taxes on the withdrawals.
With a Roth 401(k) plan, you contribute after-tax dollars, which means that your contributions are not deducted from your paycheck before taxes are taken out. This means that you will not save any money on taxes now, but when you withdraw money from a Roth 401(k) plan in retirement, you will not have to pay taxes on the withdrawals. This can be a good option if you expect to be in a higher tax bracket in retirement than you are now.