What is the difference between defined benefit and defined contribution?

Defined benefit plans and defined contribution plans are two primary categories of employer-sponsored retirement plans, and they both can help you save along your journey toward retirement. The main differentiators fall around who primarily funds the plan, control over contributions and portability. What is a defined benefit plan?

What is a defined contribution plan?

A defined contribution plan is sponsored by an employer, which typically offers the plan to its employees as a major part of their job benefits. It’s called a “defined contribution” plan because workers who participate in the plan kick in specific—or defined— amounts of money to their accounts. In many cases, the company also contributes.

What are defined-benefit plans & defined-contribution plans?

Defined-benefit plans and defined-contribution plans are two retirement savings options. Defined-benefit plans, otherwise known as pension plans, place the burden on the employer to invest for their employees' retirement years and deliver a defined monthly amount once they retire. They are complicated and expensive plans to administer.