Question

What is the main difference between a defined benefit plan and a defined contribution plan?

Answer 1

A defined benefit plan, most often known as a pension, is a retirement account for which your employer ponies up all the money and promises you a set payout when you retire. A defined contribution plan, like a 401(k) or 403(b), requires you to put in your own money.

Answer 2

A defined benefit plan is when after you work for an employer for a certain preset time and do well, your employer will give you a promised amount of pension. A defined contribution plan, on the other hand, is you using your own money and putting it in a trust fund to set aside for the future.

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