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What is a defined-benefit plan?

A defined-benefit plan is an employer-sponsored retirement plan where employee benefits are computed using a formula that considers several factors, such as length of employment and salary history. Usually, employees are required to work for a specific amount of time before they become eligible to participate in the plan.

What is a defined benefit pension plan?

“A defined benefit plan is a type of pension plan that is fully funded by employer contributions and is a promise to pay benefits at retirement based on various factors such as age, salary and years of service with the company,” says Valerie McClendon, a financial advisor at Boston Wealth Strategies.

Are defined benefit plans becoming less common?

In an age of defined contribution plans like 401 (k)s, defined benefit plans are becoming less and less common, despite the retirement certainty and security pension plans can offer. How Does a Defined Benefit Plan Work?

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