Page 22 - FlipBook BACK FROM SARAN - MAY 5 2020 - Don't Make Me Say I Told You So_6.14x9.21_v9_Neat

These traditional pension plans have virtually disappeared over the
last 30 years. In 2017, a report titled "Ultimate Guide To
Retirement" said that around 60% of companies offered defined
benefit plans to employees in 1980. That number is around 4%
today.
Section 3

Traditional Pensions Are

Going Away

A Move to Defined Contribution Plans

There has been a dramatic shift over the last 30 years from

defined benefit programs to defined contribution plans.
A defined benefit pension is a plan in which an employer

promises a specified monthly payment during retirement. That
payment is determined by a formula using the employee’s

earning history, length of employment at the company, and
the age of the employee at retirement. This is the classic

scenario that most people think of when they hear the term
“pension plan.”

A defined contribution pension plan is a plan in which the
level of contributions is fixed at a certain level. The benefits that

the employee will receive in retirement vary depending on the

return from the investments in the plan. The most common
and most well-known type of the defined contribution plan is

Chapter 1: The New Retirement