A type of defined contribution plan in which you receive a set dollar amount upon retirement, typically based on your last few years of earnings.
By dividing your assets into categories of investment (ie. stocks, bonds, cash, etc.) you can reduce the risks that are traditionally associated with investing.
- Stocks/Equities: A type of investment, which allows you to buy shares in a company, allowing you to profit from their successes, but also puts you at risk of losing money if the company fails.
- Bonds: A fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental).Many corporate and government bonds are publicly traded; others are traded only over-the-counter (OTC) or privately between the borrower and lender. (Investopedia)
- Cash-based assets: Physical money that an individual has access to through a savings account or checking account.
A type of employer-sponsored defined contribution plan that allows an employer to make contributions to an employee’s account from a company’s annual profits, although an employer is not required to make contributions in any given year.