According to the legal definition, a 401k is a retirement savings program provided by your employer in which your savings are not immediately subject to federal income taxes and in many cases state income taxes. But it is also much more. Your 401k plan is a great retirementsavings choice that provides benefits no other program offers, making it the most successful retirement savings approach available today.

Eight Reasons Why a 401k Is Right for You

1. In a 401k plan, you decide how much of your paycheck to save. You chose the contribution amount, up to the government's generous maximum. This maximum increases annually with inflation: In 2007, the maximum will be $15,500 for regular savers or a$20,500 maximum contribution if you are over 50 years old.

2. 401k saving is effortless. Your employer will automatically deduct from your paycheck the amount you choose to put away, saving you the time and effort necessary to open an individual savings account.

3. 401k makes investing easy. You invest your money in funds you choose from investment options prescreened by your employer, saving you time and expense, while reducing risk. Or your employer may invest your money for you, making it even easier.

4. Your savings are increased by your employer's matching contribution. The average employer matches 50 percent of your contribution, or 50 cents for every $1 you save.

5. Contributions to 401k accounts take place pretax. This means you can invest much more because the government doesn't impose income taxes until the money is withdrawn. This also means the growth of your investments will be on a larger pool of money than in an after-tax plan, and you might reduce your income tax bracket as well.

6. Earnings are also tax-sheltered. Because 401k plan investment earnings are reinvested without immediate taxation, the account can grow at a considerably accelerated rate.

7. Investments are long term. By investing your money over many years, as you do in a 401k plan, you can receive a far greater rate of return than you could in any passbook savings account.

8. Your 401k account belongs to you. When you change jobs you take the money with you in the form of a rollover to your new employer's 401k plan or a rollover to another tax shelter, such as an IRA.

I can boil it down even further, to just one word: growth. 401k plans are the right choice for anyone who wishes to have a successful retirement because these plans allow for incredible financial growth. In fact, the growth opportunities of the 401k plan are so impressive that both the federal government and your employer support them.

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