The National Institute on Retirement Security (NIRS) evaluated the experience of teachers in Washington and Ohio in selecting different retirement plans. Their finding: “teachers prefer a stand-alone defined benefit pension when given a choice between a pension plan or a plan that combines a defined contribution account with a pension.” Read the case studies.
Defined benefitAlso known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages investments on behalf of members, and the retirement benefit is based on factors such as age at retirement, years of employment and salary history.Defined contributionA type of individual retirement plan in which an employee saves a portion of each paycheck (along with a potential employer match) and invests that money. The employee’s retirement benefit is based on their account balance at retirement. A 401(k) is a type of defined contribution plan.
