One thought on “Defined Benefit vs. Defined Contribution”

  1. Mike Finley says:

    A defined benefit plan (pension) has the employer doing most if not all of the work for you in this retirement plan. They put in the money, they take the risk, and one day you get the pot of money that has built up over time. Years past, this was the norm. Gradually, they are being replaced with defined contribution plans.

    A defined contribution plan (401k, 403b, 457, TSP) has the employee putting in most if not all of the money into his or her retirement plan. The responsibility of funding the account and risk has been shifted to the employee. The fund grows in many cases based on the employees efforts and knowledge about investing money.

    You should care because that is your future we are talking about. What you know and what you do will play a big part in how your future retirement needs are met. Educate yourself further by reading What Color is the Sky and Graduation! Financial freedom to follow.

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