What are the four coreways that households save for retirement?
What will be an ideal response?
There are four core types of retirement savings plans:
• Social Security: Social Security is a mandatory retirement savings program. Each worker pays a Social Security payroll tax into a general government account called the Social Security trust fund. Using these funds, the Social Security trust fund pays out benefits to those workers who are currently retired.
• Defined benefit pension plans: Defined benefit pensions are contractually specified employment benefits, in which the employer promises to pay the employee a fixed annuity after retirement. The magnitude of the annuity is adjusted to reflect years of service at the employer and the level of the employee's salary.
• Defined contribution pension plans: Defined contribution pensions are individual accounts that are owned and controlled by the employee. In most cases, the employee decides how much to contribute to these accounts, and most employers match these contributions. These accounts are commonly referred to as 401(k) accounts.
• Individual Retirement Accounts (IRA): IRAs are retirement savings accounts that anyone can set up; they are usually not sponsored by a person's employer. If an individual does not contribute to her employer's defined contribution savings plan, then she can use an IRA to save for retirement.
A-head: INVESTMENT ACCOUNTS
Concept: Retirement savings plans
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The demand for money curve is shown in the figure above. A movement from point B to point C could be the result of
A) a rise in the real interest rate. B) an increase in the quantity of money held by banks. C) a fall in the nominal interest rate. D) a rise in the real interest rate matched by an equal fall in the nominal interest rate. E) a decrease in the total benefit from holding money.
To an economist, the economic costs associated with the use of resources include
A. explicit and implicit costs. B. explicit, but not implicit, costs. C. neither implicit nor explicit costs. D. implicit, but not explicit, costs.