Question

Which of the following is not true?

- You should choose mutual funds for your retirement plan that match your long-term goals.
- You should participate in an employer sponsored retirement plan.
- Your choice of investments for a retirement plan should be based upon your age, years before you retire, and your attitude toward risk.
- Young workers should likely choose mutual funds that can provide income and have less risk.

Answer 1

The incorrect statement is that young workers should primarily choose low-risk mutual funds that provide income, as they are generally better served by growth-oriented investments that may carry more risk but offer higher long-term returns.

Step-by-step explanation:

The statement that is not true is that 'Young workers should likely choose mutual funds that can provide income and have less risk.' This is because young workers, who have several decades until retirement, may benefit from the high returns of stock market investments due to their long-term investment horizon.

While mutual funds are indeed a good choice for retirement savings because they take advantage of bulk buying and selling to reduce transaction costs, young investors are typically in a better position to assume more risk.

High-risk investments such as stocks have the potential to yield higher returns over long periods, despite short-term volatility. Therefore, young workers should ideally focus on growth-oriented investments rather than prioritizing income and low risk.

Participating in an employer-sponsored retirement plan like a 401(k) or 403(b), which are tax-deferred and portable, allows employees to invest in a wide range of vehicles and benefit from employer contributions.

The choice of investments should indeed be based on factors such as age, time before retirement, and risk tolerance. It's important for investors to understand the tradeoffs between risk and return in the context of their life stage.