Retirement & Savings

What Is a Defined Contribution Plan?

A defined contribution plan is a retirement plan in which the employee, the employer, or both contribute to an individual account, and the retirement benefit depends on how much was contributed and how the investments performed. 401(k), 403(b), and 457(b) plans are defined contribution plans.

Defined Contribution vs. Defined Benefit

A defined benefit plan, such as a traditional pension, promises a specific payment in retirement; the employer bears the investment risk. In a defined contribution plan, the employee bears that risk.

Portability

Vested balances can usually be rolled over when changing jobs.

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🔗 Related Terms

401(k) Plan Pension Vesting Retirement Account Rollover Employer Match Target-Date Fund

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.