West Virginia State Life Insurance Practice Exam

Which retirement plan can an employee initiate regardless of other existing plans?

1. 401(k) plan

2. Roth IRA

3. Individual Retirement Account (IRA)

4. Pension plan

The correct answer is: Individual Retirement Account (IRA)

The Individual Retirement Account (IRA) is a retirement savings vehicle that any employee can open independently of their employer-sponsored retirement plans, such as a 401(k) or pension plan. This means that individuals have the flexibility to contribute to an IRA regardless of whether they participate in other retirement plans through their job. An IRA allows employees to set aside money for retirement with the added benefit of potential tax advantages, which can vary depending on whether the contributions are made with pre-tax income (Traditional IRA) or after-tax income (Roth IRA). In contrast, a 401(k) plan and pension plan are typically offered and initiated through an employer, meaning that an employee cannot independently open or fund these plans outside of that employer's offerings. While a Roth IRA can also be opened by an individual, the question specifically asks for the plan that can be initiated regardless of other existing plans, hence the broader category of an IRA is identified as the right choice, encompassing both traditional and Roth IRAs. Therefore, the Individual Retirement Account stands out as a unique option that provides employees the autonomy to save for their retirement without being tethered to their employment status regarding other plans.