The deduction is automatic and can only be withdrawn once an employee retires officially or resigns. The most common company retirement plan is the 401(k) plan. The benefit of this plan is that employers share profits earned from the plan with the employees (Cavanaugh and Fredda, 2002). In addition, employees save a substantial amount regardless of the harsh economy. The main disadvantage of this plan is the deduction of a certain percentage from the employees’ salary reducing their monthly income hence finding it hard to satisfy their needs.
In individual retirement accounts plan, individuals save for their retirement on their own. They acquire the money to save from their own businesses and other personal sources of income. This retirement plan is common with the self-employed citizens. They create bank accounts in which they save money on fixed deposits hence no regular withdrawal of the money. IRAs also include assets for instance building rental residential, land and other properties (Cavanaugh and Fredda, 2002). This retirement plan benefits the individuals as they chose the preferred amount they are able to save before they retire. The main disadvantage is when there is no income. savings reduce causing the individuals to work longer than they should have.
The registered retirement savings plans (RRSP) involve individuals registering with retirement companies to save for their future. The plan has rules in which members comply to for instance the set times to make contributions, the set amounts to contribute and the assets allowed in the saving scheme. The assets allowed include. bonds, shares, mortgages and many others. The main advantage of this retirement plan is that individuals can defer after one year and claim their contributions. However, once a member defers his or her benefits decrease if there exists extra income made by the member.