401(k) Plans At-a-Glance
401(k) plans allow you the option of selecting the funds you choose to invest in, found in a list of funds provided by your company’s 401(k) plan.  You have total freedom in what to invest and how much to invest, as you have control ultimately over your own personalized 401(k) plan, offered through your employer. Your employee contribution will automatically be deducted from your pay check before taxes.
Depending on your employee, you are able to contribute up to a certain percentage of your pay into a 401k; in addition, some employers will even match a percentage of your contributions. Your contributions, along with any matched contributions, are then invested into your selected funds. These funds will grow without being taxed and can be withdrawn when you reach the age 59 ½.
By the time you reach the age 59 ½, you will be required to start paying income taxes on the money you withdraw from your 401(k).  There are ways you can withdraw your funds before reaching the age 59 ½, but these withdrawals usually require a penalty along with payment of taxes.
There are two groups of your 401(k)plan:

Defined Benefit Plan
A defined benefit plan is one in which the employer promises to pay a defined amount to retirees who meet certain eligibility criteria. A defined benefit plan usually links the benefit to the amount of service and is based on the final average salary. This is the best way to predict the monthly retirement income you may receive with this type of plan, just as you might also be given the choice of a lump-sum benefit at retirement.

Defined Contribution Plan
A defined contribution plan is one that defines the contributions that an employer can make or not make on the benefit that the employee will receive at retirement.  This is a plan that you cannot predict the final price outcome of your plans. If you choose to leave the company in which you have a 401(k) invested, you are likely to receive the proceeds in a current or deferred lump sum or annuity.

Companies are prohibited by law from tapping into the money in their 401k. However, if your company goes bankrupt and you have 401(k) money invested in their stock fund, you will most likely lose all of your money. 

To get the best results of your 401(k), make sure to monitor your money frequently. If your funds/stocks are declining, try to diversify your money and do not place it all in your company’s stock alone. It is a good idea to contribute the maximum tax-deferred amount to your 401k, if you are looking for a more risky challenge with possible greater rewards.

Allocating Your Money in Accordance to Time
According to Money magazine, the suggested allocations at three life stages are:

Aggressive--for those with 35 or more years until retirement
50% - large cap stocks
15% - mid cap stocks
15% - bonds
10% - small cap stocks
10% - international stocks

Moderate--for those with 20 years until retirement
35% - large cap stocks
35% - bonds
10% - mid cap stocks
10% - small cap stocks
10% - international stocks

Conservative--for those within 10 years of retirement
 40% - bonds
30% - large cap stocks
10% - mid cap stocks
10% - international stocks
10% - cash