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.

Terminal
$ 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.

Try Ray free

Open source, local-first, and takes five minutes to set up.

$ npm install -g ray-finance
View on GitHub