Define defined benefit and defined contribution pension plan, Financial Management

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Compare and contrast a defined benefit and a defined contribution pension plan.

In a defined benefit plan, retirement benefits are defined by a formula that generally considers the worker's age, salary, and years of service.  The employee and/or the organization contribute the amounts essential to reach the goal.  In a defined contribution plan, the contributions to be build by the employee and/or employer are spelled out, but retirement advantages depend on the total accumulation in the individual's account at the retirement date.


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