Question

When considering an employer-matching retirement plan, what is the best strategy?

1) Contribute enough to maximize the employer match.
2) Avoid participating in the retirement plan.
3) Invest in high-risk assets only.
4) Contribute the minimum required by law.
5) Rely solely on Social Security for retirement income.

Answer 1

The best strategy with employer-matching retirement plans is to contribute enough to get the full employer match, taking full advantage of this component of your retirement savings.

Step-by-step explanation:

When considering an employer-matching retirement plan, the best strategy is usually to contribute enough to maximize the employer match. This approach allows you to take full advantage of the employer's contributions, which is essentially free money towards your retirement savings.

Defined contribution plans like 401(k)s and 403(b)s are now common, where both the employer and employee contribute to the worker's retirement account.

These plans are tax deferred and the funds are invested in a range of investment vehicles, potentially generating real rates of return to support retirees.

It's also crucial to recognize that Social Security alone is unlikely to be sufficient for a comfortable retirement, making it imperative to save and invest adequately during one's working years.