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A cash-balance plan is a type of pension plan in which the benefit you receive in retirement is determined by your contributions and earnings within an account. A cash-balance strategy is contributory, meaning that it's funded exclusively from varying percentages of contributions from both the employer and employee. The name comes from the way it "balances" the contributions and earnings in a profit-sharing type of pension.

A cash-balance strategy is contributory, meaning that it's funded exclusively from varying percentages of contributions from both the employer and employee. The name comes from the way it "balances" the contributions and earnings in a profit-sharing type of pension. When you retire under a cash-balance plan, you'll receive a lump sum equal to the contributions your account earned plus interest.

Employees enrolled in cash-balance plans typically aren't allowed to take this money with them when they leave their jobs. They must roll it over into another qualified retirement account such as an IRA or company-sponsored 401(k) plan. Many employees aren't aware of this stipulation until they've already given their employers notice that they plan to leave the company.

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