Which of the following categories does a 401(k) plan fall under?

A 401(k) plan is classified as a tax-advantaged retirement account. This type of account allows employees to save and invest a portion of their paycheck before taxes are taken out. The contributions made to a traditional 401(k) reduce the individual’s taxable income in the year they are made, which can lead to significant tax savings. Additionally, the funds grow tax-deferred until withdrawal, usually during retirement, when individuals may be in a lower tax bracket.

The fundamental purpose of a 401(k) plan is to help employees save for retirement, providing features like employer matching contributions, various investment options, and protection from creditors. These characteristics confirm its role as a retirement-focused savings vehicle rather than a short-term savings account, a real estate investment, or a stock purchase plan, which serve different financial purposes and objectives.