A 401(k) is a US employer-sponsored retirement plan. Traditional employee contributions are generally made before federal income tax, while designated Roth contributions are made after tax. Contributions may be invested according to the plan and your selections; investment values can rise or fall. Traditional withdrawals are generally taxable, subject to applicable rules. That's the whole idea. Everything else — the match, the limits, the vesting schedule — is detail on top of that basic structure.
The part that's easy to leave on the table: employer match
Many employers will contribute additional money on top of what you put in, usually up to some percentage of your salary — a common structure is matching 50% or 100% of what you contribute, up to a set percent of pay. Employer matching can add to retirement savings, but the amount depends on the plan formula, eligibility and any vesting requirements. A match is not the same as a guaranteed investment return, and investment values can fall. Check your plan documents to understand the contribution and vesting rules.
Contribution limits
There's a cap on how much you can put into a 401k each year, set by the IRS and adjusted periodically. There's a separate, higher combined limit that includes any employer match. If you're 50 or older, you're usually allowed to contribute extra on top of the standard limit ("catch-up" contributions). These figures change most years, so it's worth checking the current limit rather than assuming last year's number still applies.
Vesting: the part that catches people out
Your own contributions are always 100% yours from day one. Employer matching contributions are sometimes subject to a vesting schedule — meaning you only fully own that matched money after working there for a certain period, sometimes with the ownership percentage increasing gradually. Leave before you're fully vested, and you can lose some or all of the unvested match. If you're considering leaving a job, it's worth checking your vesting schedule first — it can be a real number worth timing around.
Traditional vs Roth 401k
Many plans now offer both a traditional and a Roth option. Traditional contributions go in before tax, lowering your taxable income now, but withdrawals in retirement are taxed as income. Roth contributions go in after tax, so there's no deduction now, but qualifying withdrawals in retirement are tax-free. The tax treatment of traditional and Roth contributions differs, and the outcome depends on current and future tax rules, withdrawal eligibility and personal circumstances. This explanation does not establish which option is suitable.
What happens when you leave a job
Your 401k doesn't disappear when you leave an employer, but it also doesn't manage itself. Generally you can leave it where it is (if the balance is large enough), roll it into your new employer's plan, or roll it into an IRA. What trips people up isn't the decision itself — it's forgetting to actually invest the money once it lands in a new account, since rollovers commonly default to a cash holding until you actively choose investments.
This article is general information, not personal financial advice. If you're making a real decision about your 401k — contribution levels, Roth vs traditional, or what to do after leaving a job — it's worth talking to a qualified financial adviser who knows your full situation.
