Question

50 POINTS!
Ron's employer offers a 401(k) plan with 2% match, but the 401(k) only allows investments in Ron's employer's stock. To save for retirement, Ron should invest _____.

2% to get the match in the 401(k) but invest more in a diversified IRA to reduce risk
as much as he can into the 401(k) plan
2% to get the match in the 401(k) but also open a private pension plan
1% in the 401(k) but invest at least 4% in a diversified IRA
NextReset

Answer 1

I would say the first one (A)

Answer 2

Answer:

Option A) 2% to get the match in the 401(k) but invest more in a diversified IRA to reduce risk

Step-by-step explanation:

A 401(k) is a retirement plan that allows eligible employees of a company to save and invest for their own retirement on a tax deferred basis. Only an employer is allowed to sponsor a 401(k) for their employees. The employee's contributions may be matched to a limit by the employer.

Diversification is a technique that reduces risk by allocating investments among various financial instruments.

Since 401(k) only allows investments in Ron's employers stock only, it will be wise that Ron should invest more in a diversified IRA to reduce the risk of investment and invest just to the limit that is matched in the 401(k) plan.