What are the benefits of a defined contribution plan?

The main benefits of a defined contribution plan include tax savings on contributions and earnings, flexibility in investment choices, potential employer matching funds, and portability if you change jobs. Additionally, many defined contribution plans offer asset protection from creditors in certain situations.

What is a Defined Contribution (DC) plan?

A defined contribution (DC) plan is a retirement plan that's typically tax-deferred, like a 401 (k) or a 403 (b), in which employees contribute a fixed amount or a percentage of their paychecks to an account that is intended to fund their retirements.

What is a defined-contribution plan?

In defined-contribution plans, the benefit is not known, but the contribution is. It comes in a designated amount from the employee, who has a personal account within the plan and chooses investments for it. As investment results are not predictable, the ultimate benefit at retirement is undefined.