What is established and funded by both the employer and the employee for retirement purposes?

A retirement plan generally encompasses various structures and products designed to provide income after retirement. It is a broad term that includes both defined benefit plans and defined contribution plans, effectively serving as an umbrella under which many specific retirement savings options fall.

The distinct characteristic of a retirement plan is that it is established and funded by both the employer and the employee. This collaborative funding model is crucial in building a comfortable income source for individuals once they reach retirement age. Such plans incentivize saving for the future and often include contributions from both sides, enhancing the total retirement savings accrued.

While the other options may fit into retirement planning, they serve more specific roles. A defined benefit plan guarantees a specific payout in retirement based on factors such as salary and years of service but does not always require employee contributions. A defined contribution plan relies on contributions made by the employee (and sometimes the employer) with no guaranteed final benefit amount; the retirement payout depends on investment performance. The 401(k) is a specific type of defined contribution plan that allows employees to save pre-tax or Roth contributions, often with some level of employer matching.

In summary, the term "retirement plan" correctly captures the collaborative essence of both employer and employee contributions, making it the most accurate choice in this context