Tag Archives: contribution

Certain benefits and defined contribution plans

A defined benefit plan is a pension plan in which future retirement benefits after joining a company are determined according to a prescribed formula. This is a calculation that usually includes your highest average salary, time spent at the company, and your contributions from you and your employer. You can also get information about international pension plans through various online sources.

Money is invested in your name and the company takes the risk if something goes wrong. There is usually a standard rate of return guaranteed by your employer each year. This is the return on investment that your money will make if you can see your retirement plan in your bank account.

A defined contribution plan determines the money you put into the program: the amount you or the company will deposit on your behalf. This is a certain amount in dollars based on your salary for the year you worked.

You can think of this as the company (and sometimes you and the company) contributing to your retirement account. It is similar to a registered retirement plan (RRSP) account, except that it is locked.

Blocked means the money is in your name and you are entitled to the money, but you cannot withdraw it unless there are exceptional circumstances. (ie this is the only money I have and have to pay my bill). Just like with an RRSP account, you can invest in defined contribution scenarios and take risks.

If you invest in a fund and lose money, you face the consequences. For this reason, it's good to have a plan. When you have a defined contribution account, you need to make a decision.