(NewsNation) — With a new year, it’s time to start saving for retirement, no matter your age.

Many employers provide retirement plans to full-time employees, and one of those is a 401(k), which stands for Section 401(k) of the U.S. Internal Revenue Code. This section established this retirement savings plan.

It’s one of the most common types of employer-sponsored retirement accounts, in which the employee can allocate a percentage of their paycheck to automatically save in the 401(k). Some employers may match your contribution.

The money is invested into an account managed through an investment company, such as Fidelity Investments, Charles Schwab and Vanguard, to name a few. The money will then grow based on the investment market.

If you take out the money before a certain amount of time, you may have to pay taxes when you withdraw.

There are typically two types of 401(k) plans: Traditional and Roth. The former taxes your money when you withdraw, while the latter taxes your money before it goes into the account.

“Unlike with withdrawals from a regular 401(k), with a Roth you owe the IRS nothing when you start taking qualified distributions as long as you are 59 ½ and have held the account for five years or more,” according to NerdWallet, a financial service website.

There are IRS-set limits on how much you can contribute; this year, the limit is $23,500, up from $23,000 for 2024.