# 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](/content/learn/roth-ira/index.html): 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](/content/learn/tax-bracket/index.html): A tax bracket is a range of income taxed at a specific rate in the U.S.
- [Compound Interest](/content/learn/compound-interest/index.html): Compound interest is interest earned on both your original principal and on previously accumulated interest.
- [Asset Allocation](/content/learn/asset-allocation/index.html): Asset allocation is how you divide your investment portfolio among different asset classes — stocks, bonds, real estate, and cash.
- [Gross Income](/content/learn/gross-income/index.html): 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](https://github.com/cdinnison/ray-finance)