2026 Aviation Insurance and Risk Management Complete Practice Test

A 401(k) is a defined contribution plan that lets employees defer part of their salary into a retirement account, often with employer matching. It’s specifically designed for employees to save for their own retirement through payroll deferrals, with taxes on the contributions and earnings usually deferred until withdrawal (and Roth versions available). This makes it the classic workplace vehicle for personal retirement savings in the private sector.

A pension plan is a defined-benefit arrangement funded by the employer, providing a future benefit rather than letting the employee build an account they own. Annuities are financial products you can purchase to provide retirement income, not workplace savings plans. A nonprofit-specific sibling, the 403(b), works similarly to a 401(k) but is for employees of certain nonprofit organizations.