(NewsNation) — With a new year, it’s time to start saving for retirement, no matter your age. However, you might be confused about where to start. Many employers provide retirement plans to full-time employees, and one of those is a 401(k) 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 even match your contribution.

How does a 401(k) plan work?

Any money that is put into your 401(k) plan is invested into an account that is 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 withdraw the money before a certain amount of time, you might have to pay taxes on that amount when you take it out.

401(k) plan types

401(k) plans typically come in two types: Traditional and Roth. With a Traditional 401(k), taxes will be taken from your amount when you make a withdrawal. With a Roth 401(k), your money is taxed before it is put into your 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 limits to how much you can contribute; this year, the limit is $23,500.

Losing your job: Does this affect your 401(k)?

In a way, yes, losing your job will affect your 401(k) plan. However, you will not lose the money in your account. According to Fidelity, you will have four options to choose from. You can keep the money with your previous employer, move your money into an IRA plan, roll the money over into a new employer plan or withdraw the money.

Remember, if you withdraw the money before age 59.5, you might have to pay taxes for the early withdrawal.