401(k)
A 401(k) is a US retirement account offered through an employer. You invest part of each paycheck, with a tax break now (traditional) or later (Roth), and the money is meant to stay until retirement.
🌍 In the real world
Traditional contributions come out of your pay before income tax, so they lower this year's tax bill, and you pay tax when you withdraw. Roth contributions are taxed now and qualified withdrawals are tax-free. Either way, gains inside the account aren't taxed year to year. Taking money out before age 59½ usually brings a 10% penalty on top of any tax.
Non-profits and schools offer the similar 403(b). Self-employed people can open a Solo 401(k) or a SEP-IRA. The yearly limit is set by the IRS: $23,500 for employee contributions in 2025. What the account earns depends on the investments chosen, and it can lose value.
Example
In the 22% bracket, putting $100 of pay into a traditional 401(k) lowers this year's federal income tax by $22, so your take-home pay drops by about $78.
🎮 In Journey Shares
The game has no retirement accounts, but holding for the long run has its own tax break: gains on shares held more than a week are taxed at 15% instead of 22%. That's step 5 of the money plan. →
🧭 How to use it
In the game, hold at least one position for more than a week. Long-term gains are taxed at 15% instead of 22%, the same idea as a tax-advantaged account rewarding patience.
🎮 Learn 401(k) the fun way
Try it in a live 3D city with play money: trade shares in real public figures, get margin-called, pay your taxes and rob a bot or two. Free, and nothing real is at stake.
❓ Common questions
What happens to my 401(k) if I change jobs?
It stays yours. You can usually leave it in the old plan, move it into the new employer's plan, or roll it into an IRA.
Traditional or Roth 401(k)?
It depends mostly on whether you expect a higher tax rate now or in retirement. Many people split contributions between the two.
📜 Where it came from
🧩 Quick check
Which term is this?
“An ____ is a fund that buys every stock in a market index, such as the S&P 500, in the same proportions, so it matches the market's return instead of trying to beat it.”
🔗 Related terms
- Employer match: An employer match is money your employer adds to your retirement account when you contribute, such as 50 cents for each dollar you put in, up to a set share of your pay.
- IRA (traditional and Roth): An IRA is a US retirement account you open yourself.
- Savings rate: Your savings rate is the share of your income you save or invest.
- Capital gains tax: Capital gains tax is tax on the profit from selling an investment for more than you paid.
- Index fund: An index fund is a fund that buys every stock in a market index, such as the S&P 500, in the same proportions, so it matches the market's return instead of trying to beat it.
Categories: Personal finance
Practise with $10,000 in play money
Free. No real money involved.