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Defined Contribution Plan Definition

A defined contribution plan is a form of retirement savings that offers a tax-advantaged account for employees to contribute to. This can be done individually or with the help of their employer. Contributions and growth within the account are typically tax-free until withdrawal, with the exception of Roth options. This means that in defined contribution plans, the responsibility for investment risks and potential gains lies with the employee, not the employer. While some employers may offer matching contributions, the final decision to invest ultimately rests with the employee.

Automatic Investment Plan (AIP)

An automatic investment plan, or AIP, is a tool that facilitates the implementation of a dollar cost averaging approach in investing. Through this method, an investor can re...

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Excess Contribution

An IRA contribution that surpasses the maximum legal limit is considered an excess contribution and is subject to penalty taxes. These taxes are imposed for each year that t...

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Earned Income Rule

An important factor to consider when contributing to an IRA is eligibility. Both Traditional and Roth IRAs require an individual to have earned income in order to contribute...

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Vested

It means that after a certain period of time, you will have full rights to those contributions and any earnings they have accrued. Understanding the concept of vesting is c...

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