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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.

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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IRA Rollover

When discussing financial planning, one important term to understand is "rollover." This refers to the transfer of funds from one qualified retirement plan, such as a 401(k)...

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Vesting

As we delve into the realm of finance, it is important to understand the concept of vesting. This refers to the predetermined period of time after which employer contributio...

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Defined Benefit Plan

A retirement plan, referred to as a 'qualified plan', is structured to provide a benefit to employees upon retirement. The benefits are usually calculated as a percentage of...

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