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Lesson 86 · Written for kid, teen, and little

401(k) basics — work's retirement account

Your job pays you, but they also help you save.

The idea

Many employers offer a 401(k) — a retirement account where contributions go straight from your paycheck. Some employers add their own money when you contribute; that is an employer match. Match formulas and limits vary, and you may need to stay at the job for a time before all of that money belongs to you. Check your plan's rules and your budget when choosing how much to contribute. A match adds money to the account, but it is not always dollar for dollar, and investments can still lose value. 💼

A

Words to know

4

401(k)

A retirement account offered through a job, funded straight from your paycheck.

Employer match

Money an employer may add when you contribute. Matching formulas, limits and vesting rules vary by plan; check the terms and your budget.

Pre-tax

Money put in before taxes are taken out, which lowers your tax bill now.

Contribution limit

The most you're allowed to add to the account each year.

Try it — no accountMake the call

In this hypothetical plan, an eligible worker earns $50,000 and gets a dollar-for-dollar 401(k) match on contributions up to 6% of salary. Choose one option that reaches the $3,000 matching cap. Check plan rules and what fits the worker’s budget.

In the full lesson

  1. 1Make the call

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