Final answer:
A generous 401K with matching contributions means the employer offers a retirement plan and will match the employee's contributions to enhance their retirement savings. This matching is essentially additional funds for the employee, and the 401(k) plans are tax deferred and portable.
Step-by-step explanation:
When a job listing mentions a generous 401K with matching contributions, it means that the employer offers a retirement savings plan, specifically a 401(k), and will match the contributions the employee makes to that plan up to a certain percentage.
These matching contributions serve as an additional benefit to the employee, as it is essentially free money added to their retirement savings.
The 401(k) plan is a type of defined contribution plan, where both the employee and employer can contribute.
The funds in this plan are typically invested in various vehicles like stocks, bonds, and mutual funds.
These plans are tax deferred, meaning that the taxes on these contributions are paid when the money is withdrawn during retirement, not when the money is deposited into the account.
Another important feature of a 401(k) is its portability; employees can take their 401(k) with them if they change employers.
Moreover, the defined contribution plans, such as 401(k)s, have replaced the older style pension and defined benefits retirement plans.
They are more advantageous as they are less burdened by inflation and offer individual control over investment choices.