401(k) and Pension Plans
401(k) plans and traditional pension plans are two parts of the traditional retirement plan.
This plan includes the “employer-provided pension” and “personal retirement savings or 401k”.
Here are differences in each plan:
- Guarantee a set income once retirement begins.
- Investment and “longevity risk” lie solely on plan provider.
- Defined contribution plan that places investment and longevity risk on individual employees.
- Employees choose their own retirement investments.
- No guaranteed minimum or maximum benefit.