What IS a 401(k) plan, anyway? It's a type of retirement plan offered by employers. You decide how much you want automatically deducted from your paycheck before federal and state income taxes are calculated. Your employer deducts your contribution and submits it to the company that administers the plan. You choose how your contributions are invested, based on the different funds offered by your plan. Some of the best reasons to participate in a 401(k) plan include:

You can reduce your taxes

Because your contributions are deducted before taxes are calculated (except for Social Security Taxes), you pay fewer taxes. To calculate your tax savings, visit Quicken.com's 401(k) Calculator.

You may get "free" money from your employer

Most employers (80%) match a percentage of your contributions. For example, if your company offers a 50% match (a common percentage), for every $100 you contribute, your employer contributes $50. Some companies contribute even more, some less.

It's easier to save money

Since your contribution is automatically deducted from your paycheck, you won't be tempted to spend it.

You'll benefit from professional management

Most companies use professional portfolio managers who perform research and analysis to identify good investments so you don't have to.

Your 401(k) account is portable

When you move from one job to another, your new employer will probably allow you to roll your 401(k) balance into their plan. If not, you can open a special IRA at most financial institutions and roll your balance into it, or you can often leave your 401(k) balance invested in the old employer's plan and start a new 401(k) account with your new employer.

You may be able to access your money before retirement

Although you have to meet specific criteria in order to withdraw funds from your 401(k) plan before the age of 59 1/2, many plans allow loans where you borrow from your account and repay the principal and the going interest rate back into your account.

Your money grows faster

Your contributions, company match, and the earnings you make on your investment grow without being taxed until you withdraw the money at retirement. Because taxes aren't deducted until retirement, more of your money is working for you over the years.

Not participating in your employer's 401(k) plan is like seeing tens of thousands (or hundreds of thousands) of dollars on the ground and not bothering to stop to pick it up. Think about it. And then visit your employer's human resources or benefits department and ask about the 401(k) plan.