The Death of the Defined Benefit

By: Financial Shopper Network

    The defined benefit was once the great horse of retirement. Due to the inception of the 401K Plan and other retirement plans, this account has almost been rendered obsolete. What were changes the gave way, and signaled the end of the "defined benefit plan."

    Once not long ago, it was imperative to work for a company that was going to pay you,  a specific, dollar amount during retirement. The defined benefit plan does just that. Based on the number years of service and the amount of money you made, you would receive a retirement check,  each month from your employer.

    Times have changed. The 401K changed how employers approached their employees' retirement. A new retirement plan had emerged, whereas the employee, no longer had to make sure the employees had a set amount for retirement. The defined benefit could cause a financial strain on the business, especially during bad economic times. However you are mandated to pay that retirement benefit,  when you have a defined benefit in place, the 401K is different. Some businesses probably went out of business, because they could not afford to pay their retired employees.

    Today you see very few companies with defined benefit packages. Most of municipalities and the old insurance company, may still have this plan for their employees. The rest are either history or on their last leg. Maybe one day, we will be saying the same thing about the 401K.