What's a defined benefit plan?
- What's a defined benefit plan?
- Can I decide how my money is invested?
- What's the difference between a defined benefit plan and a defined contribution plan?
- What happens when I retire?
- Exactly how much will I get when I retire?
- Am I eligible for a defined benefit plan?
- Just how common are defined benefit plans?
- What if I work for the government?
- What are the advantages of a defined benefit plan?
- What are the disadvantages of a defined benefit plan?
- Can I tap my money early?
- Can I count on the money to be there when I need it?
- Will PBGC payouts be as big as I was counting on?
- Is there insurance on government plans?
- How can I make sure my pension is covered by the PBGC?
A defined benefit plan is a retirement account for which your employer does all the work, including ponying up the money and deciding where to invest it. It promises you a set payout when you retire, based on your salary and how long you worked there.
There are two basic kinds of defined benefit plans: pensions and cash-balance plans. These plans are a sweet deal. In general, you just show up for work and, assuming you meet basic eligibility rules, you're automatically enrolled in the plan. (In some instances, however, you aren't enrolled until you've completed your first year on the job.) You also need to stick around on the job for several years - typically five - to be fully "vested" in the plan. If you leave before then, you will forfeit any unvested pension benefits.
