Defining The Types Of Pensions
Pensions are a critical part of retirement planning. You can’t just assume that you have enough money in your 401(k) plan to support you through your golden years.
Defined Benefit Plan
A defined benefit plan is a pension plan that provides a guaranteed benefit based on a formula. The employer is responsible for funding the plan, and employees have no control over how their benefits are calculated. They also bear all of the risk associated with investing in equities or bonds.
Defined Contribution Plan
A defined contribution plan is a retirement plan in which the employer does not promise to pay a specific benefit at retirement, but instead contributes a certain amount to an individual account for each employee. The employee then manages that account by investing it in mutual funds or other investments.
Cash Balance Plan
A cash balance plan is a type of defined benefit pension plan. It’s …
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