What type of financial plan automatically deducts money from an employee's paycheck for retirement savings?

A 401(k) plan is a type of retirement savings plan that allows employees to contribute a portion of their earnings directly from their paycheck before taxes are deducted. This automatic deduction feature makes it easier for employees to save for retirement as contributions are made consistently over time without requiring any additional steps from the employee after setup.

The benefits of a 401(k) plan include tax-deferred growth on contributions and investments until withdrawal, which can significantly enhance the savings potential for retirement. Many employers also offer matching contributions, adding an additional incentive for employees to participate in these plans.

While other options, such as a pension plan or a 403(b) plan, might also involve retirement savings, they do not necessarily feature automatic paycheck deductions in the same way a 401(k) does. A Roth IRA allows for direct deposits but typically does not involve employer payroll deductions, making it more dependent on individual contributions.