◈ GLOSSARY · RETIREMENT
Defined Contribution Plan.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
A retirement plan — 401(k), 403(b), 457, SIMPLE, SEP — where the contributions are defined but the eventual balance depends on what you and your employer put in and how the investments perform. The employee carries the investment risk and the longevity risk. It's the dominant model in the private sector and the reason individual investing literacy matters so much now.
◈ IN PRACTICE
Example
Two engineers retire after 35 years with the same salary history; one had a 401(k) with a 50% match and chose an S&P 500 index fund, the other parked everything in a stable-value fund. Same career, very different ending balances.
◈ RECOMMENDED READING
