Question

Assume you are an employee, age 25, and you are given a choice between a defined benefit plan and a defined contribution plan. Which one do you prefer? How did you make your evaluation?

Answer 1

There art primarily two types of employers sponsored retirement plans: defined benefit pension plans and defined contribution plans. In a defined benefit plan, there is a specified retirement amount guaranteed by the employer. The employees to not have control over the funds that they will receive at the time of retirement. A defined contribution plan on the other hand is funded primarily by the employee. Under such plans, both employer and employee contribute to collect retirement funds for the employee. As a 25 year old, I will opt for a defined contribution plan. This is because I can make sufficient contributions to ensure that sufficient amount is accumulated for my retirement. In the young age, I can contribute a higher amount due to greater income and ensure that my retirement needs are taken care of .