A defined contribution plan does not “define” the benefit but rather “defines” the contribution. Money is contributed to an account that grows with investment earnings during an individual’s working years. At retirement, a typical defined contribution plan (such as a 401(k)) allows for the complete or partial distribution of the account balance. Assets are not pooled and the individual is expected to “draw down” his/her own balance during retirement years. The obvious challenge is to achieve meaningful returns while taking monthly withdrawals and, all the while, not running out of money.
