401(k) is the most popular pension plan (savings account) of the US private pension system. The plan got its name from a clause number in the US Internal Revenue Code (401(k)). This clause allowed employees to contribute a portion of their salary before income taxes into their personal retirement savings accounts as part of a defined contribution pension plan organized at their place of work. By the way, employers can voluntarily contribute funds to the same accounts, and such payments are also not taxed. The share of employer contributions varies widely from 10% to 100%. Sometimes the amount of contribution is calculated in the form of a formula that depends on the amount of employer’s profit. Employees obtain ownership of their contributions from the moment they are paid. As for employer-paid contributions, it usually takes 5-6 years from the date of joining them with the plan before employees obtain ownership of employer-paid contributions.
Roth Individual Retirement Plan (Roth IRA) is a tax-advantaged account or annuity established in the United States exclusively for individuals. A person can invest in such a pension plan and receive tax deductions.
This year, Goldman Sachs recommends merging two pension plans with your chosen life insurance company when you retire. The financial experts recommend buying a retirement annuity with a fixed income (it should exceed inflation by 1%-2%) and a long-term care insurance policy (such policies will cover your bills in hospitals, clinics, and nursing homes).
Source: https://money.com/investing-strategy-better-retirement-lifestyle-annuities/
