Defined contribution plan(redirected from Account Balance Plans)
Defined contribution plan
Defined Contribution Plan
Defined contribution plan.
In a defined contribution retirement plan, the benefits -- that is, what you can expect to accumulate and ultimately withdraw from the plan -- are not predetermined, as they are with a defined benefit plan.
Instead, the retirement income you receive will depend on how much is contributed to the plan, how it is invested, and what the return on the investment is.
One advantage of defined contribution plans, such as 401(k)s, 403(b)s, 457s, and profit-sharing plans, is that you often have some control over how your retirement dollars are invested. Your choice may include stock or bond mutual funds, annuities, guaranteed investment contracts (GICs), company stock, cash equivalents, or a combination of these choices.
An added benefit is that, if you switch jobs, you can take your accumulated retirement assets with you, either rolling them into an IRA or a new employer's plan if the plan accepts transfers.