A retirement plan which allows employees to save part of their salary in a tax-deferred investment account. Funds in this account are not taxed until they are later withdrawn, presumably in retirement. Employers often match part or all of the employee's deposits. In participant-directed plans, the employee can select from a number of investment options, usually an assortment of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Penalties usually apply to withdrawals made before age 55, though most plans allow employees to borrow limited amounts tax- and penalty-free from their accounts.