What happens when I retire?
- 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?
You'll get a fixed payout from your defined benefit plan. That payout can be either a lump sum or a monthly check - you usually get to choose.
The size of your payout has nothing to do with how well your employer did managing the money. Instead, your payout is simply a function of a basic formula that factors in how long you worked and how much you earned. That is, your benefit is defined by a set formula.
Again, that's about 180 degrees from how a 401(k) works. A 401(k) is a defined contribution plan: You are responsible for investing money from your own paycheck into the plan - sometimes with a matching contribution from the boss - and you are in charge of choosing how you want your money invested among the mutual funds offered. There is no guaranteed payout when you retire; what you end up with depends on how well your investments perform.
