Gretchen is responsible for explaining her company's retirement benefits to new employees. She explains that the company matches up to 3% of employee contributions to the company 401(k) plan. After two years, these contributions become vested. Gretchen says that the employees should invest in the company 401(k) when they start since it has all the same risks and benefits as investing in an IRA. Is Gretchen's description accurate?
A.
Yes; they both could lose money if investments perform poorly.
B.
Yes; both could come up short if workers fail to invest enough.
C.
No; only IRAs rely on a worker's individual investment choices.
D.
No; workers would lose non-vested funds from 401(k) plans if they left the company.
Answers
In the above problem, both could lose money from contributing money to the existing 401(k) money. The 3% employee contribution has set new records for the contribution of money.
Therefore, the employees are asked to invest in the 401(K) scheme since it has all the benefits and risks of IRA with the benefits a bit more.
Option D is correct.
Since IRAs are through microeconomics which is defined as the individual funds are of their own and 401Ks are funded by means of the employing business.
Therefore, it is wise to conclude that the workers would lose their 401k benefits if they leave the company.
A branch of Economics called Microeconomics that branch of economics that deals with the firms or any individual’s behaviour while taking decisions regarding the investing limited resources and the interactions among these individuals and firms.