The 401(k) plan is one of the most widely used retirement vehicles. It is an arrangement that allows an employee to choose between taking compensation in cash or deferring a percentage of it to an account under the plan. The amount deferred is usually not taxable to the employee until it is withdrawn or distributed from the plan. However, if the plan permits, an employee can make 401(k) contributions on an after-tax basis, and these amounts are tax-free when withdrawn.

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