A 401(k) plan is a type of defined contribution plan, which is named after the section of the Internal Revenue Code that created it. This plan, provided to employees of private companies by the employer, allows the employees to fund retirement savings. Your pretax wages grow tax-deferred without paying federal (and in most cases) state tax on the savings and the interest earnings.

A 403(b) plan is similar to a 401(k) but is for nonprofit organizations. With either plan, if you don't contribute to the plan, you won't get the money, even if the employer makes contributions in your account. Employees participating in a 401(k) or 403(b) plan earmark a percentage of their salary to be contributed each pay period. In 1996 federal law limits contributions to $9,500 for either plan.

When you are offered a choice about where to invest your money in a defined-contribution plan, remember that fixed-income investments, such as CDs, popular among many employees, lose purchasing power because of inflation. See the planning guide Basic Investment Options for guidelines on where to invest your money to help it out-pace inflation.

As you read through your pension plan booklet, check to see if your plan is integrated with Social Security. Companies use an integrated plan to reduce the size of the company pension for lower-paid workers. Lower-paid workers receive a higher replacement of their pay from Social Security compared with workers at the other end of the pay scale. If you work for a small company, you are likely to be a member of an integrated plan. However, about 50 percent of larger corporations also integrate their plans. Your plan is less likely to be integrated if it was negotiated by a union. If your plan is integrated, be sure your employer is using your actual Social Security benefit, not an estimated amount, or you may receive a lower pension benefit than you are entitled to.