HOW DOES A DEFINED-BENEFIT PLAN DIFFER FROM A 401(K) PLAN?
A defined-benefit plan like the Co-op Retirement Plan is a traditional type of pension plan where benefits are based on wages and service. Here are some major ways that it differs from a 401(k) plan: You receive a lifetime monthly benefit from a defined-benefit plan, a benefit you can never outlive. In a 401(k) plan you have a dollar balance which might be depleted before your death. The benefit you receive in a defined-benefit plan is not dependent on investment performance. You will receive the benefit promised by the Plans formula regardless of the volatility of the financial markets. In a 401(k) plan your account balance is directly affected by the ups and downs of the investments you have chosen. The assets of a defined-benefit plan are professionally managed for the benefit of all participants. In a 401(k) plan you must make your own investment decisions. Your benefit in a defined-benefit plan is safeguarded (within limits) by the Pension Benefit Guaranty Corporation, a federal a
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