In this article, we’ll take a look at the differences between a pension, defined contribution, and defined benefit pension.
What is a definedbenefit pension?
A defined benefit is a type of pension that is not a defined-contribution pension, and is therefore different to a defined retirement pension.
A definedbenefit is a pension that has the same benefits as a defined pension.
For example, a defined Benefit Pension will have the same retirement benefits as an individual retirement savings plan (i.e. a defined IRA, 401(k), or 403(b) plan).
A defined contribution is a kind of pension in which a taxpayer contributes to a fund that pays out a fixed sum of money.
For more information on what is a retirement pension, see Retirement Pension FAQ.
The basic differences between defined contribution and definedbenefit pensions include: The amount of the contribution is not set in stone until the fund has been established.
For most people, this means that the contributions are limited to a fixed amount over the life of the pension plan, and it can vary depending on a number of factors, such as the age of the participant and how much time the participant has spent in the workplace.
The contribution is tax deductible.
This means that you don’t have to pay income tax on the money you contribute.