It earns interest and assures you a steady income as long as you live, or for a set time frame. A retirement plan in which the employee makes regular, tax-deferred contributions from a salary each pay period. Often, the employer matches a percentage of the contribution. The employee then selects from a menu of investment choices, typically 5, into which the funds are divided. Vesting is the employee's right to receive the employer-contributed funds after a set number of years of employment.
Contributions are typically tax-deductible.
The account is tax-free until you withdraw the money at retirement. A new type of IRA, the Roth IRA, is available beginning in 1998. It has a different set of rules and is free from federal tax when you withdraw the money. A retirement plan for someone who is self-employed. These are retirement funds paid by the federal government provided the person has been employed for at least 40 quarters.