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PENSION PROTECTION
PENSION PLANS PENSION FACTS SERVICES |
Retirement plans are frequently classified as defined benefit or defined contribution according to how the benefits are determined. A defined benefit plan guarantees a certain payout after retirement, according to a fixed formula which usually depends on the member's salary and the number of years' membership of the plan. In a defined contribution plan, the payout is dependent upon the amount of money contributed, and the performance of the investment vehicles utilized. Some types of retirement plans, such as cash balance plans, combine features of both defined benefit and defined contribution schemes. Retirement plans may be set up by employers, insurance companies, the government or other institutions such as employer associations or trade unions. Retirement plans have increased in importance and in being utilized by more of the US population over the last half century but especially since 1980. Since 1980 and increasingly since 2000, there has been a shift from defined benefit plans to defined contribution plans. Less and less defined benefit plans are being offered because they represent a large and not fully predictable cost to employers. As of 2005, most defined benefit plans are offered by large and/or governmental employers. Retirement plans are defined in tax terms by the IRS code and most are also regulated by the Department of Labor's ERISA provisions. There are a wide variety of plans available and a very large amount of tax laws and regulations affecting them.
Know Your Pension does not endorse any of these retirement planning tools, but provides our readers with information to help plan for the future: Social Security Administration Retirement Planner Allstate Financial Services Prudential Retirement Planning Tutorial Fidelity Investments Retirement Resource Center AARP Bulletin Online
T. Rowe Price Smith Barney Retirement Planning
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