Defined Contribution

A defined contribution is a variety of retirement plans where the employee and employer contributions are defined or predetermined. In a defined contribution plan, the employer establishes the portion or allocation of money that will be contributed to the employee's retirement account. Still, the ultimate significance of the retirement benefit is not guaranteed. The contributions are made regularly, such as monthly or annually, and are usually based on a percentage of the employee's wage or a fixed dollar amount. The contributions are invested in various financial instruments, such as stocks, bonds, joint funds, or other investment prospects decided by the employee from a range of options provided by the plan.