What's So Great About a 401(k)?

The following video is part of our "Motley Fool Investing Basics" series, in which Motley Fool contributor and financial planner Dan Caplinger discusses topics from around the investment world.

Today, Dan looks at 401(k) plans and why they're a useful tool in helping you save for retirement. Employer-sponsored plans are especially valuable because many employers add money to your contributions, either through matching contributions or via profit-sharing. Dan notes that 401(k)s can also save you a bundle in taxes, with huge contribution limits. Yet 401(k)s come with some limitations, in that early withdrawals can come with penalties and increase your tax liability. Dan recommends watching out for costly high-fee options and sticking with lower-cost alternatives where they're available.

401(k) plans can make it easier for you to build long-term wealth. But you may also want to invest in individual stocks in order to maximize your profit potential. In our free report, "3 Stocks That Will Help You Retire Rich," we reveal some stocks that could help you as well as some winning wealth-building strategies. Click here to keep reading.

The article What's So Great About a 401(k)? originally appeared on Fool.com.

Dan Caplinger has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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