What is Defined Contribution?
Defined Contribution is a retirement plan that has a set percentage or amount of money put aside by a company every year for its employees. The plan restricts how and when employees can withdraw this money without penalty. How much the plan ultimately will pay out upon retirement is unknown because, although the contribution is fixed, the benefit isn’t.
The most popular of these plans is the 401(k). More than seventy-five percent of companies that offer 401(k) plans contribute to them based on how much the employee contributes. Some match employee contributions dollar-for-dollar while most contribute 50 cents for every dollar up to a certain percentage.