March 21, 2014 Admin | March 21, 2014 What is the difference between a defined benefit plan and a defined contribution plan? Why do you need to know?
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You typically don’t pay in any of your paycheck to participate in a defined benefit plan such as a IAPERS or a pension, your employer does. But you do have to put your own money into a defined contribution plan like a 401(k) or a 403(b) or TSPO. A defined benefit plan is a much better deal for you but they are much harder to find, you need to know what one you have and how much you need to pay in to your retirement plan.
TSP not TSP0
Well said, Garrett. Let’s review.
The defined benefit plan (pensions) are how retirement plans used to work. They are slowly being phased out and replaced with defined contribution plans (401k, 403b, TSP, 457). This requires the individual to fund their retirement plan if they want a financially successful life after work. The responsibility has been moved to the individual. Take control!