◈ GLOSSARY · RETIREMENT
Defined Benefit Plan.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
A traditional pension where the employer promises a specific monthly payment in retirement, usually based on years of service and final salary. The employer carries the investment risk; the employee just shows up and accrues. Mostly extinct in the private sector outside of unions, utilities, and government, but if you have one, it's effectively a bond-like income stream you don't need to manage.
◈ IN PRACTICE
Example
A pension formula of 1.5% × years of service × final average salary for an employee with 30 years of service and a $90,000 final average pays $40,500/year for life starting at retirement.