Am I eligible for 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?
Sadly, if you work for anyone but the government, you probably aren't. Ever since 401(k)s and other defined contribution plans were introduced in the early 1980s, scads of employers have been nuking their traditional defined benefit plans.
It's not hard to see why. With a traditional pension (the most common kind of defined benefit plan), the company takes on 100% of the responsibility to fund it. The employer has to set aside money - at least in theory - to make sure it can cut you your pension check when you retire.
With a 401(k), the company puts most of the financial responsibility on you. You invest in the plan by having money taken out of your paycheck, and you have to figure out how to invest that money among the sometimes confusing array of funds offered in the plan. True, the company might throw in a matching contribution to your 401(k) - but that match amounts to a whole lot less than what your employer would be on the hook for if it were running an old-school pension.
