Economics and Personal Finance Practice Exam 2026 - Free Personal Finance Practice Questions and Study Guide

An employer-sponsored retirement plan is defined as a retirement savings plan that is provided by an employer to its employees as part of their benefits package. This type of plan typically includes arrangements like 401(k) plans or pension plans, where employees can contribute a portion of their earnings, sometimes with matching contributions from the employer.

These plans are designed to encourage employees to save for retirement by offering tax advantages and, in some cases, employer contributions, making them an attractive option for individuals looking to build their retirement savings. This structure helps ensure a more secure financial future for employees when they retire, as well as providing a clear framework for contributions and withdrawals.

The other options misrepresent key aspects of employer-sponsored retirement plans; they do not reflect the nature of how these plans are structured or who they serve. An employer-sponsored plan involves contributions facilitated by the employer, distinguishing it from solely independent or self-created savings plans.