Question

what types of retirement system characteristics works best for retaining employee's long term?

Answer 1

The different types of retirement system are the following:

Individual Retirement Arrangements (IRAs)

An IRA is a tax-favored investment account. You can use the account to invest in stocks, bonds, mutual funds, ETFs, and other types of investments after you place money into it, and you make the investment decisions yourself unless you want to hire someone else to do so for you. You might consider investing in an IRA if your employer doesn't offer a retirement plan or if you've maxed out your 401(k) contributions for the year.

Roth IRAs

A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA.

• You cannot deduct contributions to a Roth IRA.

• If you satisfy the requirements, qualified distributions are tax-free.

• You can make contributions to your Roth IRA after you reach age 70 ½.

• You can leave amounts in your Roth IRA as long as you live.

• The account or annuity must be designated as a Roth IRA when it is set up.

401(k) Plans

A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts.

• Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).
• Employers can contribute to employees’ accounts.
• Distributions, including earnings, are includible in taxable income at retirement (except for qualified distributions of designated Roth accounts).

Roth 401(k)

A Roth 401(k) combines features of the Roth IRA and a 401(k). It's a type of account offered through employers, and it's relatively new. As with a Roth IRA, contributions come from your after-tax paycheck rather than your pre-tax salary. Contributions and earnings in a Roth are never taxed again if you remain in the plan for at least five years.

The best part about a Roth 401(k) is that there is no income limit as with a Roth IRA. The annual contributions are the same as a traditional 401(k), too—just with after-tax dollars. Withdrawals are the same as Roth IRAs, too, but the distribution rules match those of a traditional 401(k)

SIMPLE IRA

The Savings Incentive Match for Employees (SIMPLE) IRA is a retirement plan that small businesses with up to 100 employees can offer. It works very much like a 401(k).

SEP IRA

A Simplified Employee Pension (SEP) IRA allows you to contribute a portion of your income to your own retirement account if you're self-employed and have no employees. You can fully deduct these contributions from your taxable income.

The maximum annual contribution limits are higher than most other tax-favored retirement accounts: $57,000 or 25% of income— whichever is less—as of 2020.

From the above types of plans The IRA is the better of retirement savings plans. An individual can set up an IRA at a financial institution, such as a bank or brokerage firm, to hold investments — stocks, mutual funds, bonds and cash — earmarked for retirement. IRAs—are tax-advantaged accounts that hold the investments you choose. i think this works best for retaining employee's long term

If you can only invest in one type of retirement account, your money may grow fastest in a 401(k) plan with an employer match.