Site Title

Sub-heading text.

When some people think of pensions, they only think of defined benefit plans. And it's true that these more generous plans are less common than their more restrictive cousins. But how common is a typical defined advantage plan?

The defined benefit has become the rarer, albeit more popular, option of the two plans. But viewed in a different way, defined benefit plans are more popular than defined contribution plans.

The reality is that the two types of plan, even with their differences, share many similarities. In fact, employees often have the opportunity to contribute to both types of plans through one employer. In some cases, this benefits both parties because it allows for a more diverse portfolio, while also allowing the employee to save more than they would otherwise be able to do with just one plan.

A typical defined advantage plan is often thought of as being reserved for high-income earners who can afford to put a chunk of their paycheck into the plan. But that's not always the case. Many plans give employees an option: contribute more and receive larger benefits, or contribute less and take home more money now.

It is becoming clear that both types of plans are here to stay. Employers like them because they offer predictability and protection. Organizations like the American Institute of Certified Public Accountants have made a strong case for defined contributions in recent years, but they still advocate using both types of plans to build a stronger portfolio.

Copyright 2021 Finance Informar - All Rights Reserved. Privacy Policy