Defined Contribution Pension Plans

Defined Contribution Pension Plans are retirement savings plans where both employees and employers contribute money to individual accounts. The amount contributed is predetermined, but the final benefits depend on the investment performance of the contributions over time. Unlike Defined Benefit Plans, which promise a fixed payout, the retirement income from a Defined Contribution Plan can vary based on how well the investments grow. When employees retire, they typically withdraw funds from their account to support their retirement lifestyle. Common examples include 401(k) and 403(b) plans in the United States.