Final answer:
A retirement plan in the form of an annuity or mutual fund for public sector employees is a 403(b) plan, which is a type of defined contribution plan offering tax-deferred growth and portability across jobs. Option A
Step-by-step explanation:
The correct answer to the student's question is A. 403(b). A 403(b) plan is a retirement plan that is often offered to employees of public sector and non-profit organizations.
It allows employees to save for retirement by investing in mutual funds and annuities and is similar in many ways to the more widely-known 401(k) plan used in the private sector.
Both plans are types of defined contribution plans, where the employee, and sometimes the employer, make regular contributions. These contributions are invested and grow on a tax-deferred basis until retirement, when the funds can be withdrawn.
Defined contribution plans are increasingly common in place of traditional pension plans. They provide flexibility and portability, allowing the worker to transfer the account when changing jobs.
By contributing to a 403(b) plan, employees in the public sector can manage their own retirement savings and potentially protect themselves from the effects of inflation over time by earning real rates of return on their investments. Option A