Retirement plan in which contributions are specified but the final benefit depends on investment performance and account value.
A defined-contribution pension plan is a retirement plan where the contribution formula is set, but the final retirement benefit depends on how much is contributed and how the underlying investments perform.
That makes it the main structural contrast to a defined-benefit pension plan, where the payout formula is promised in advance.
Defined-contribution plans matter because they move more retirement uncertainty onto the participant.
contributions can be known in advance
account balances depend on market returns and fees
the retiree bears more of the investment and longevity decision burden
For many workers, modern retirement saving is effectively a defined-contribution problem rather than a guaranteed pension problem.
Defined-Benefit Pension Plan: The main formula-based alternative.
401(k) Plan: Common defined-contribution retirement structure.
Retirement Savings: Broader household accumulation concept.
Pension Plan: Parent category that includes both DB and DC designs.