3
QuizMultiple Choice

Investing

Question 3 • Personal Finance - EL3403

In what way does a 401(k) differ from an individual retirement account (IRA)?

Answer
A
A 401(k) is created through an individual’s employer.
B
A 401(k) can be created by individuals who deposit money.
C
A 401(k) allows consumers to contribute before taxes.
D
A 401(k) is a good long-term investment strategy.

Explanation

A 401(k) is a retirement plan offered through an employer, while an IRA is generally opened by an individual. Both account types can have tax advantages, so the ability to contribute before taxes is not what uniquely distinguishes a 401(k). The correct choice is “A 401(k) is created through an individual’s employer.”

AI-written and checked against the verified answer.

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