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401(k) plans are retirement plans that some private corporations offer their employees. A 403(b) plan is similar to a 401(k) but it is offered to employees of some non profit organizations. In both of these plans the individual chooses to deduct part of their paycheck and place it into an investment portfolio they formulate. These plans allow individuals to select among different types of investments, depending on how much risk they are willing to assume. The contribution into the account reduces the individual's taxable income. Employers may choose to match a portion of the employee's contribution up to 50 percent. These investments grow tax free until the money is withdrawn during retirement.
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