ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Hence, a 401(k) would be the best retirement savings option for a 40-year old engineer whose employer offers a five percent contribution match.

Detailed explanation-2: -Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you’re earning $75, 000, your retirement account balance should be around $225, 000 when you turn 40. If your employer offers both a traditional and Roth 401(k), you might want to divide your savings between the two.

Detailed explanation-3: -The main difference between 401(k)s and IRAs is that employers offer 401(k)s, but individuals open IRAs on their own, through a broker or bank. IRAs typically offer more investment options, but 401(k)s allow higher annual contributions. The contribution limit for 401(k)s is $22, 500 in 2023 ($30, 000 if age 50 or older).

Detailed explanation-4: -A 401(k) plan is an employer-sponsored retirement savings plan that offers important tax benefits. You contribute to the plan via payroll (salary) deduction, which can make it easier for you to save for retirement.

Detailed explanation-5: -Stay on target. Make your employer sponsored qualified retirement plan (QRP) work for you. Consider investing on your own as well as at work. When changing jobs, evaluate options for your retirement plan savings.