Question

a. an account geared strictly towards retirement that is sponsored by your employer. b. a personal retirement account that is independent of an employer. c. a low-risk, interest-bearing account designed for short-term savings goals. d. a certificate of deposit with a term of four years and one month. how is an individual retirement account (ira) different from a 401(k)? a. iras are time-restricted accounts with a fixed yield, while 401(k)s are not. b. iras are personal retirement accounts independent of your employer, while 401(k)s are employer-sponsored. c. iras are insured by the ncua, while 401(k)s are insured by the fdic. d. iras can be opened with a small amount of money, while 401(k)s require a large starting deposit.

Explanation:

To determine the difference between an IRA and a 401(k), we analyze each option:

• Option A: IRAs don't have a fixed yield, and 401(k)s can have various investment options, so this is incorrect.
• Option B: IRAs are personal retirement accounts (individual - no employer sponsorship), while 401(k)s are employer - sponsored. This matches the key difference between the two.
• Option C: IRAs and 401(k)s are not insured by NCUA or FDIC in the way described. NCUA insures credit union accounts, and FDIC insures bank accounts. Retirement accounts have different protection mechanisms.
• Option D: 401(k)s are often funded through payroll deductions and don't have a large "starting deposit" requirement, and IRAs can be opened with relatively small amounts, but this is not the main difference between the two.

Answer:

B. IRAs are personal retirement accounts independent of your employer, while 401(k)s are employer - sponsored.