what ONE answer is a disadvantage of a contribution retirement plan
it requires a seperate legal contract
it always pays less than a pension plan
the amount of money paid out never changes
retirement funds can decrease if the stock market falls
The correct answer is: retirement funds can decrease if the stock market falls.
One disadvantage of a contribution retirement plan compared to a pension plan is that retirement funds can decrease if the stock market falls.
The correct answer is: retirement funds can decrease if the stock market falls.
To arrive at this answer, we need to understand the concept of a contribution retirement plan, also known as a defined-contribution plan. This type of retirement plan involves individuals contributing a portion of their salary or earnings into an investment account, usually with the help of their employer. The funds in this account are then invested in a variety of assets, such as stocks, bonds, or mutual funds.
One disadvantage of a contribution retirement plan is that the value of the investments can fluctuate based on the performance of the financial markets, particularly the stock market. If the stock market experiences a downturn or a significant decline in value, it can lead to a decrease in the retirement funds held in the account. This means that individuals may receive less money in the future when they retire, compared to what they had initially anticipated.
Therefore, the correct answer is that the retirement funds can decrease if the stock market falls.