Which of the following statements is true of contribution plans for retirement?
A.
Surviving spouses are often guaranteed income.
B.
They are less common in private business.
C.
Funds are generally invested and may grow or shrink.
D.
Employees are guaranteed income for the rest of their lives.
C. Funds are generally invested and may grow or shrink.
The true statement regarding contribution plans for retirement is:
C. Funds are generally invested and may grow or shrink.
Explanation:
A. This statement is not necessarily true for all contribution plans as it depends on the specific terms and conditions of the plan.
B. Contribution plans for retirement are commonly found in both private and public sectors, so this statement is not true.
C. This statement is true for most contribution plans. The funds contributed are typically invested in various assets such as stocks, bonds, or mutual funds, and their value can fluctuate over time.
D. Retirement plans such as defined contribution plans (e.g., 401(k)) do not guarantee a specific income for life. The amount of income that an employee will receive in retirement depends on factors such as the amount contributed, investment performance, and withdrawal strategy. Thus, this statement is not true.
To determine which of the statements is true of contribution plans for retirement, let's examine each option:
A. Surviving spouses are often guaranteed income:
To verify this statement, we can research the common features of contribution plans for retirement, such as 401(k) plans or Individual Retirement Accounts (IRAs). These plans do not typically guarantee income for surviving spouses unless specific provisions have been added by the employer or plan provider. Therefore, statement A is most likely false.
B. They are less common in private business:
To determine the prevalence of contribution plans in private businesses, we can refer to industry reports, surveys, or government data. This information can help us determine whether such plans are indeed less common in private business compared to other sectors. The specific answer may vary based on the source and current trends, but conducting research can give us an idea of the prevailing situation.
C. Funds are generally invested and may grow or shrink:
Contributions made towards retirement plans, such as 401(k) plans and IRAs, are typically invested in various assets, such as stocks, bonds, or mutual funds. The performance of these investments can cause the value of the funds to either grow or shrink over time. Thus, statement C is likely true.
D. Employees are guaranteed income for the rest of their lives:
Retirement contribution plans, such as 401(k) plans or IRAs, do not generally guarantee a specific amount of income for life. The retirement income in such plans largely depends on the contributions made by the employee, the investment performance, and other variables. Therefore, statement D is most likely false.
In conclusion, based on the information provided, statement C (Funds are generally invested and may grow or shrink) is the most likely true statement regarding contribution plans for retirement.