Certain cases like employees with a generous
defined benefit pension plan where retirement income will be fairly high, the tax free withdrawals from the TFSA during retirement is welcomed.
Not exact matches
Unlike Social Security,
where current workers pay for current retirees,
defined benefit pension plans are supposed to be pre-funded.
In keeping the existing
defined benefit pension plans, policymakers are choosing to preserve a system
where teachers and their employers are contributing more than teachers will ever receive back in
benefits.
This topic is particularly relevant in K - 12 education,
where debates are waged over whether teacher
pension plans should be maintained as
defined benefit (DB) systems or if they should transition to
defined contribution (DC) systems which are, by definition, fully - funded.
If the vast majority of workers remained in one
pension plan for the life of their career, the back - loaded nature of
defined benefits would create some perverse incentives around the normal retirement age (
where pension wealth comes to a steep spike), but it wouldn't matter that the employee was accumulating very little early in their career.
Mainly,
defined benefit plans, such as a
pension, place the responsibility of saving on the employer, versus a 401 (k)
where the employee bears the responsibility to save for their future selves.
I believe this phenomenon will manifest itself with people becoming less enamored with self - determination (like with 401 (k)
plans) and more interested in old - fashioned
defined benefit pension plans,
where someone else does the heavy lifting of investment for you.
Defined -
benefit Keogh
plans are set up like traditional
pension plans where they are based on salary, years of employment, age and other factors but you are the one actually funding it, not an employer.
Where should the discount rate for liabilities on a
defined benefit pension plan be set?
Ultimately, the 403 (b)
plan is a
defined contribution
plan (often called a DC
plan),
where the participant makes contributions and investment decisions, as opposed to a
pension or
defined benefit plan (often called a DB
plan),
where the employer makes all, or a majority of contributions and all of the investment decisions.
Jonathan Chevreau: I have a few little income streams from
defined benefit plans but it's not like the 30 years in one place
where you're completely 90 percent of your income was going to come from that particular
pension.
The
pension funding provision doesn't affect 401k
plans or similar
defined contribution
plans,
where your
benefit is determined by your account balance.
I found it interesting to to read this Wall Street Journal article
where public
defined benefit pension plans are not fleeing hedge funds.
From spending more time fixing up her rural cabin to signing up for swimming lessons and spending more time on her stained - glass hobby, Nathalie has
planned well for the day in July when, 55 years of age, she will have completed 10 years at the government,
where she can walk away with a
Defined Benefit Pension plan that pays $ 17,000 annually for life — starting when Nathalie turns 60.
It may have been from a
Defined Contribution (DC)
pension plan where you bought mutual funds during your employment or it may have been from a
Defined Benefit (DB)
pension plan where you chose a lump - sum payout instead of a future monthly
pension payment.
This is very different from
defined benefit plans,
where the amount of monthly
benefit at retirement is what's being
defined (e.g., you'll get a
pension check of $ 500 a month at age 65 for life).