by 
The Curious Bag
-
A defined contribution retirement plan is a retirement account offered by employers (such as a 401k) that depends on both employee contributions and the investment performance of those contributions, as opposed to years of service (e.g. such as with a pension fund).
Employee Control
Employees typically have a degree of control over the investment made by their defined contribution retirement plan, having the option of choosing between a variety of stocks and bonds.
Tax Deferment
All contributions made to most defined contribution retirement plans are tax-deferred. Taxes are not paid on earnings until the funds are withdrawn.
Corporate Matching
As an added benefit, any employers match employee contributions to defined contribution retirement plans up to a specific amount.
Withdrawal Requirements
Funds may not be withdrawn from the defined contribution retirement plan without penalty unless an individual is 59 years old, purchasing their first home or funding a specific educational or medical expense.
Risk
Employees bear the risk of their defined contribution plan underperforming, as all contributions are invested in the market.
Source:
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC