What does it mean by 401k retirement plan?

What is a 401k retirement Plan?
How does it 401k plan work?
 What are the benefits of having a 401(k) retirement plan?

A 401(k) is a company/employer sponsored retirement plan that allows workers or employers to take out a portion of money from their daily pay cheque, store it on a retirement plan account and earn interest tax-deferred. The term, “Tax-deferred” ,means this saved income is not taxable until you withdraw it at the age of 65 or more.

A 401(k) retirement plan must be sponsored by an employer or an organization, The actual work of administration and monitoring of accounts is usually outsourced to independent banks, financial service, mutual fund company’s enterprises and more. As soon as an employee gets a paycheck at the end of the month, he can transfer a portion of it (there are annual limits) to his 401(k )account. Types of investments available include mutual funds, bonds, and money market instruments (both short and long term).

How money is contributed to a 401k Retirement Account?

- Fixed percentage of paycheck goes directly into 401(k) account
- Employer makes profit-sharing contributions into the 401(k) plan
- Employer as an incentive, puts in some extra money (on top of the paycheck deduction) into the employee's retirement account

If an employee quits working with his company, the 401(k) retirement account still remains active for the rest of his/her life. 

If you leave your current employer and have a 401(k) account, you can move this account to a professional financial institution. After this, the account changes from a 401(k) retirement account into an IRA account. However, if an employee quits his former employer and joins a new one, he can do what's called a 401(k) rollover to his new company.