Retirement Planning

Defined Benefit Retirement Plans are structured to calculate the benefits using a defined formula that utilizes factors including; the employment period and salary histories. Under this plan, all investment portfolio options and investment risk, are controlled by the employers. In contrast, Defined Contribution Plans give more decision making leeway and choices to the employee. Defined Contribution Plans can have the options of choosing between different investment options such as stocks, mutual funds or other available options. The employees are also free to decide whether to contribute and the amounts that they wish to contribute through paycheck deductions. This plan can also have cases where the employers contribute to the employee’s contribution plan.

Defined Benefit Plans seem very appealing as they have a form of permanence and guarantee to them compared to the Defined Contribution plans. However, being a waitress, defined Benefit plans are not a viable option. The nature of waitressing work also makes it hard to enroll in a 403(K) plan, since such plans are only available for the employees working for tax-exempt public entities.

Previously having had little information about 401 (K) plans, it was easy to assume that being a waitress limited the available options. However, this chapter clarifies this misconception, having provided the knowledge that the only restrictions an employer can impose on the employees joining a 401 (K) plan are; a minimum twenty-one year age requirement, and attainment of at least a year-long working duration with a minimum one thousand hours of service. With the information acquired on the need for having a retirement plan, and having confirmed eligibility, it is clear that joining 401(K) plan should be a priority.  The 401(K) plan can provide a good supplement for an existing Individual Retirement Account, to ensure financial security in the retirement years.

Works cited:

Slesnick, Twila, and John C. Suttle. IRAs, 401 (k) s & Other Retirement Plans: Strategies for Taking Your Money Out. Nolo, 2015.