What does a 401(k) plan generally provide its participants?

A 401(k) plan generally provides its participants with a defined retirement benefit by allowing them to save and invest a portion of their paycheck before taxes are taken out. This means that contributions to the plan reduce the participant's taxable income, and the growth of the investments in the account is tax-deferred until withdrawal, typically during retirement.

The defined nature of this retirement benefit comes from the ability of participants to predict their contributions based on salary and the matching contributions that their employer may offer. Furthermore, while participants have the flexibility to choose how their funds are invested among various options provided by the plan, the ultimate goal is to accumulate savings that will provide a steady income during retirement.

This structure encourages long-term savings and investment, supporting the idea that 401(k) plans are primarily vehicle for retirement income, rather than immediate cash benefits or risk-free investments. Flexibility in access and investment options allows participants some control over their savings, but it does not change the fundamental purpose of providing a retirement benefit.