Question

Describe how​ employer-sponsored retirement plans work in general.

In an​ employer-sponsored retirement​ plan,

		the money can be invested in any type of investment account chosen by the employee.
		you​ and/or your employer contribute money to a retirement account each pay period.
		the money is taxed at the capital gains tax rate.
		the money is taxed when the contribution is made.

Answer 1

Employe - sponsored retirement plan  is a benefit offered by the organisation.Plans provide employees with an automatic way to save for their retirement while benefiting from taxes.Money fow directly to the plan before deduction of tax.As a result, less of your income ends up getting taxed.Employees who enroll in such programs capitalize on the benefit of receiving discounted services.Employer-sponsored retirement plans can be a great source of income when you retire. Retirement plans generally fall into two categories: defined benefit plans and defined contribution plans.

A defined benefit plan promises you a specified monthly benefit at retirement. The benefit may be a fixed dollar amount or may depend on a plan formula that considers factors such as salary and years of service.

Defined benefit plans also are known as pension plans. Employers sponsor defined benefit plans and typically hire investment managers to make investment choices. The employer shoulders the investment risks.

A defined contribution plan, does not promise you a specific payment upon retirement. In these plans, you or your employer (or both) contribute to your individual account under the plan, sometimes at a set rate, such as percentage of your annual salary.

In a defined contribution plan, the employee shoulders the investment risks, and the value of the account will fluctuate due to changes in the value of the investments. Upon retirement, you receive the balance in your account, which depends on contributions plus or minus investment gains or losses.There is no one size fits all employer-sponsored retirement plan. Instead, there are many options out there, and the best one for you depends on a number of factors. In general, an employer-sponsored retirement plan provides useful benefits to both employees and employers. These plans include things like automatic paycheck dedications transferred to savings, tax breaks and some companies even offer to match employee contributions up to a certain amount.