You have learned about the different retirement investments but is there one that is better? All the retirement accounts usually invest in stocks, bonds, and mutual funds. Some employers will match your contributions; the time and amount of taxes you pay is another difference.
Click the tabs below to compare the different types of retirement accounts. After you have reviewed the who, when, what, and how of retirement investing, read the scenario and answer the question.
How to deposit funds: automatic paycheck withdrawal put directly into your account
Matching contributions: employer matches contributions
When is it taxed: taxed when you retire
Who sets it up: set up by your employer
How to deposit funds: you must set aside money to put into the account
Matching contributions: no matching contributions
When is it taxed: taxed when you retire
Who sets it up: you set it up at a bank or investment firm
How to deposit funds: you must set aside money to put into the account
Matching contributions: no matching contributions
When is it taxed: taxed now
Who sets it up: you set it up at a bank or investment firm
Ebony's parents have been discussing with her their retirement investments. She doesn't understand the difference between a 401k and an IRA: What is an advantage of investing in a 401k?
A 401k is an employer-sponsored retirement plan. One advantage is that you have automatic paycheck withdrawal so there is no temptation to spend the money. Another advantage is that employers match your contribution.
