Glossary
401(k)
A 401(k) is an employer-sponsored retirement savings plan that lets you contribute pre-tax income (traditional) or after-tax income (Roth 401k), often with an employer match. Contributions grow tax-deferred until withdrawal in retirement.
Why it matters
An employer 401(k) match is free money — if your employer matches 50% of contributions up to 6% of salary, not contributing at least 6% is leaving thousands on the table every year. Beyond the match, the pre-tax contribution reduces your current taxable income, and the 2024 contribution limit of $23,000 allows substantial tax-advantaged savings.
Example
On a $90,000 salary with a 50% employer match up to 6%: contributing 6% ($5,400) earns a $2,700 match — that's a guaranteed 50% return before any investment gains.
How Ray helps
Ray can track your 401(k) contributions and growth alongside your other accounts. Ask to see your year-to-date contributions vs. the annual limit.
$ ray "am I on track to max out my 401(k) this year?"Related terms
Roth IRA
A Roth IRA is a retirement account funded with after-tax dollars, meaning withdrawals in retirement — including all investment growth — are completely tax-free.
Tax Bracket
A tax bracket is a range of income taxed at a specific rate in the U.S.
Compound Interest
Compound interest is interest earned on both your original principal and on previously accumulated interest.
Asset Allocation
Asset allocation is how you divide your investment portfolio among different asset classes — stocks, bonds, real estate, and cash.
Gross Income
Gross income is the total amount you earn before any deductions — taxes, insurance premiums, retirement contributions, and other withholdings.