Defined-Contribution Plan

Defined-contribution plans, such as a 401(k) and 403(b), are retirement savings plans offered by employers and funded by an employee with pretax contributions.

Workers allocate some of their paycheck into an investment account, such as a like a 401(k), where they can buy investments like stock and bond funds. Employers often offer a company match, where they contribute some money to the account.

These plans can help employees grow a significant retirement nest egg if started early enough. Plus, defined-contribution plans are portable, meaning if workers switch companies, their contributions (and their company’s if vested) move with them.