401K and some USA background knowledge

(1)in 401K, we receive company contribution every month, but it is in the reserve account, we can only withdraw them after retriement, so why text says investment risk is under employee? we can’t get the cash before retirement, how to invest? in pension plan, we also get money after retirement. (2) income producing asset, total return method mentions we can sell non-income generating asset by sell bond and stock, so what is the income-generating asset? (3) in USA, for the local, do we charge capital gain tax and dividend tax, what kind of people is typical tax defered account, does tax defered account need to pay tax after retirement. what kind of people is tax exempt account?

  1. Defined Contribution (401k) says that the company will match a certain % of your salary that you defer into an account that cannot be accessed until you reach retirement age without penalty. You can cash this in but face immediate taxes and early withdrawl penalty. You also pick your own investments and the company owes you nothing else after you leave. You can transfer a 401k to another company/financial advisor. Defined Benefit (pension) means that for every year you work the company owes you a certain income after retirement, vested amount. They invest the money and will be liable for paying you after you retire, given they are still in existence. If they underfund or make bad investments, they still owe you the money. Risk is on them. 2. Not sure what you are asking. 3. An individual can set up an IRA at a brokerage/money manager that takes pre tax contributions, invests them, hopefully grows, then you can begin to withdraw after retirement age and are taxed then. Most likely you will be in a lower tax bracket because you will be living off of the income from these assets. They are also protected from liability when you are sued. A Roth IRA allows you to invest post tax $$ and withdraw them untaxed or for a first time home purchase I believe.

thanks. 2), I’m asking the difference between income-generating asset and non-income generating asset? I also confused about performance -based clients and fee-based clients, that assume I 'm in JP Morgan, does fee based clients means the client invest stocks and I just provide the investment suggestion, for performance based clients, the client send money to jp morgan, and I invest on behalf of the clients, in reality, good client manager will favor performance-based clients, but rousy client manager will prefer fee-based clients because the investment return is negative, so the client manager will not collect any bonus? Am I right?

Performance managers = hedge funds. Performance matters because these don’t make a lot of money unless they outperform and stay above their watermark provisions. Usually there is a 1-2% annual fee charged to the client’s assets in order to cover administrative expenses. Running a hedge fund is not cheap. fee based = mutual funds. The managers simply take a cut of the total AUM on an annual basis that ranges from .1%-2.5%. The argument is that fee based managers do not have to outperform. They get paid regardless of performance. Performance based fees are only paid out if the manager is able to live up to the contract provisions. Some managers only take a performance fee if they outperform a particular benchmark by x% amount. Also, a manager may only be paid a performance fee in some cases if there is a watermark provision in place.