For years, the focus of retirement planning has been primarily on defined contribution (DC) plans like 401(k)s. Recently, however, there has been renewed interest in defined benefit (DB) plans, especially after IBM decided to restore its pension plan. But are pensions really poised for a comeback? Let’s explore further.
Traditional DB pension plans are designed to reward long-term, career employees by providing the largest benefits to those who remain with their employer until retirement. The benefits are backloaded, meaning the most substantial accruals happen toward the end of an employee’s career when the average salary is highest and benefit multipliers based on service tenure are substantial.
