Depending on the obligations there are two types of pension plans, defined benefit plans and defined contribution plans
A defined contribution plan is a retirement plan in which the employer, employee or both make contributions on every salary cycle. Retirement accounts for employees and benefits are set are based on the amounts deposited to these accounts plus any gain or loss on investment of the money deposited in the retirement account. Only employee contributions to the retirement account are guaranteed, future retirement income cannot precisely predicted. In defined contribution plans, future retirement income move in accordance to gain and loss to the retirement account. A defined contribution plan, the employee contributes an amount to his/her retirement account, it could be matched by the employer but is not mandatory.
In a defined contribution plan, contributions are paid into employee retirement account by employees and employers. The contributions are then invested and gain and losses on investment are assumed by the employee in terms of risk on the investment. In a defined contribution plan, investment gains and investment risk are assumed by each employee and not by the employer. This risk is never assumed by …show more content…
In these plans, the employee selects the types of investments which the retirement money should be invested for the retirement plan. Usually the employee can only choose from 10 mutual funds or other low-risk securities. Defined contribution plan are characterized by tax advantages, which money put aside for retirement account in taxed until the money is withdrawn. Also, any capital gain into the retirement account is not taxed. Portion of employee contributions to be matched by the employer which also has the advantage of tax break. Money cannot be withdrawn by employees before the employee reaches 60 years or with a penalty fee to
A defined contribution plan is a retirement plan in which the employer, employee or both make contributions on every salary cycle. Retirement accounts for employees and benefits are set are based on the amounts deposited to these accounts plus any gain or loss on investment of the money deposited in the retirement account. Only employee contributions to the retirement account are guaranteed, future retirement income cannot precisely predicted. In defined contribution plans, future retirement income move in accordance to gain and loss to the retirement account. A defined contribution plan, the employee contributes an amount to his/her retirement account, it could be matched by the employer but is not mandatory.
In a defined contribution plan, contributions are paid into employee retirement account by employees and employers. The contributions are then invested and gain and losses on investment are assumed by the employee in terms of risk on the investment. In a defined contribution plan, investment gains and investment risk are assumed by each employee and not by the employer. This risk is never assumed by …show more content…
In these plans, the employee selects the types of investments which the retirement money should be invested for the retirement plan. Usually the employee can only choose from 10 mutual funds or other low-risk securities. Defined contribution plan are characterized by tax advantages, which money put aside for retirement account in taxed until the money is withdrawn. Also, any capital gain into the retirement account is not taxed. Portion of employee contributions to be matched by the employer which also has the advantage of tax break. Money cannot be withdrawn by employees before the employee reaches 60 years or with a penalty fee to