Defined Contribution Plan

A defined contribution plan is a retirement option that lets employees and employers contribute to their own tax-advantaged account, where employees contribute their money while their employer typically makes a matching contribution. Many defined contribution plans also offer tax benefits, but do not promise a specific amount of benefits at retirement. Some of its examples include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans, typically invested in select mutual funds and money market funds, sometimes including annuities and individual stocks. With a defined contribution plan, there are no guarantees, and participation is both voluntary and self-directed.