Defined contribution plan
A defined contribution plan is like a piggy bank that your parents give you to save up money for the future. Your parents give you a certain amount of money each week or month to put into your piggy bank, and when you grow up, you can use all the money in your piggy bank to buy the things you need or want.
In a defined contribution plan, your employer gives you a certain amount of money each pay period that is put into a special account for you. This account is called a retirement account, and the money is invested in different things like stocks, bonds, or mutual funds. Over time, the money in your retirement account grows as the investments make money.
When you retire, you can take out all the money that has grown in your retirement account and use it to pay for things you need or want, like rent, food, or travel. But you need to be careful, because if you take out too much money too soon, you might run out of money before you die.
So, a defined contribution plan is like your piggy bank, but it's for your retirement. Your employer puts money into it for you, and it grows over time so you can use it when you're older.
In a defined contribution plan, your employer gives you a certain amount of money each pay period that is put into a special account for you. This account is called a retirement account, and the money is invested in different things like stocks, bonds, or mutual funds. Over time, the money in your retirement account grows as the investments make money.
When you retire, you can take out all the money that has grown in your retirement account and use it to pay for things you need or want, like rent, food, or travel. But you need to be careful, because if you take out too much money too soon, you might run out of money before you die.
So, a defined contribution plan is like your piggy bank, but it's for your retirement. Your employer puts money into it for you, and it grows over time so you can use it when you're older.
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