Final answer:
The 401(k) is the employer-sponsored retirement plan that enables employees to save for retirement, typically through regular contributions from both employer and employee. These plans offer tax advantages and are portable when employees change jobs. Unlike the 401(k) and Roth 401(k), IRAs and Roth IRAs are usually set up by individuals and may not be employer-sponsored.
Step-by-step explanation:
The employer-sponsored retirement plan that allows employees to set aside money for retirement is the 401(k). Both the 401(k) and its variant, the Roth 401(k), are types of defined contribution plans where employers can contribute a fixed amount to the worker's retirement account. These contributions are typically made on a regular basis, often through payroll deductions. Moreover, employees have the option to contribute as well, and these plans offer tax benefits such as tax deferral on the traditional 401(k) contributions.
Other retirement savings vehicles mentioned, such as the IRA (Individual Retirement Account) and the Roth IRA, are generally established by individuals and are not employer-sponsored, although IRA accounts can be part of an employer-sponsored plan. The key difference between these accounts and 401(k)s lies in their establishment and contribution process, as well as certain tax treatment specifics.
It's important to note that these retirement plans allow for the investment of funds in a variety of investment vehicles, providing potential growth over time and to an extent, safeguarding against inflation.