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Defined-Contribution Plan |
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Defined Contribution Plan A retirement plan in which the employee and/or employer contribute a set dollar amount each month. The benefits of a defined contribution plan are not set, and depend upon how well the contributions are invested before the pensioner starts to make withdrawals. The disadvantage of a defined contribution plan is the possibility that the investments will not perform as well as expected, giving the pensioner a less secure retirement. The advantage is that the pensioner, while still making contributions, has the ability to determine how the contributions are invested, at least to a certain extent. See also: 401(k). Defined-Contribution Plan What Does Defined-Contribution Plan Mean? A retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee. There are restrictions on when and how the employee can withdraw these funds without penalties. Investopedia explains Defined-Contribution Plan There is no way to know how much the plan ultimately will give the employee upon retirement. The amount contributed is fixed, but the benefit is not. Related Terms: Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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