Answer:

In the United States, as in many other developed countries, the government has a system set in place that will equip workers to prepare for their retirement. This is called the 401k retirement plan, or 401k for short. The traditional 401k is set up so that a worker can invest part of his income without having to pay taxes on it immediately. Only when the money is withdrawn are the taxes collectible.

There are other types of 401k plans, such as the Roth 401k plan. In this set up, the money invested in the Roth 401k plan is considered as after tax dollars. This means that income tax is paid within the year that money is contributed to the plan.