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How is a 401k different from an individual retirement account (IRA)?

A 401k is a good long-term investment strategy.
A 401k allows people to contribute before taxes.
A 401k is created by an individual who deposits money.
A 401k is created by an employer that matches contributions.

Respuesta :

soneyedesola44

Answering the question, 401k is created by an employer that matches contributions. This implies the correct answer is D

A 401k and IRAs are contributions plans and both plans provide tax-advantaged retirement savings.  

Further Explanation

401K is a retirement plan that is sponsored by the employer. A 401K retirement plan means you have to contribute a certain portion of your paycheck. The contributions usually take place before the income taxes on your paycheck are removed.  

There are various 401K plans with different investment options but the options applicable to 401K plans depend on the provider.

However, the money you contribute towards your 401k accounts is pre-tax. This money is invested into different investments and it is to be determined by the sponsor.  

Individual Retirement account (IRA) is also a tax-advantage retirement saving that can be created by an individual.  

However, the different types of IRAs include:

Traditional IRAs: with this type of individual retirement account, you can make contributions towards your investment retirement account before the income taxes on your paycheck are deducted.

Roth IRAs: this individual retirement account is a special account, you will be taxed on the money you contribute to investment retirement account but won’t be taxed if you decide to withdraw your money in future. This type of individual retirement account is good if you are making a lot of money

Other types of individual retirement account include

  • Sep IRAs:
  • Simple IRAs

LEARN MORE:

  • Which is a retirement plan that offered by employers ?  https://brainly.com/question/4802253
  • What is a major difference between a traditional Individual Retirement Account and a Roth IRA  https://brainly.com/question/7126728

KEYWORDS:

  • 401k
  • individual retirement account
  • IRAs
  • employers
  • Roth IRAs
  • sep IRAs
  • Simple IRAs
shristiparmar1221

Since 1978, 401k plan has become prominent for many employees in US. It is a Company sponsored plan which provides the special tax benefits to its employees.

In this plan an employee voluntary invests a certain amount of his pay check, which is directly transferred to his investment account before the deduction of federal income tax.

The maximum limit of investment is upto $19500.

What is an  Individual retirement account?

An Individual retirement account is a traditional method of investing for retirement. By investing in an IRA one can expect an average annual return between 7 to 10%.

But unlike 401k plan, this plan includes risk, as the investment is driven by the market forces of demand and supply.

Therefore option 4 is the correct option, as Investment retirement account is not an employer sponsored investment account.

Learn more about 401k plan, here;

https://brainly.com/question/1044954

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