Many differences and similarities exist between the defined contribution and the defined benefit plans. A defined benefit plan offers a retired person a lifetime payout depending on the number of years they served and their salary in their last few years of work. In rare cases, the payouts may be extended to beneficiaries after death (Ivey, 2012). On the other hand, contribution plans, allows workers to make pre-tax donations to their retirement accounts although the employer in certain instances may contribute some amount. In a defined benefit plan, the retiree receives payouts throughout life, but in a defined contribution plan, money is received until the savings are exhausted. It must be stressed that defined benefit plans are more expensive to the employer than defined contribution plans, the major reason why they are uncommon in the private sector lately (Ivey, 2012). In a defined benefit plan, funds are given by both the employer as well as the employee even though in certain instances the employer may take up the whole contribution. In contrast, in a defined contribution plan, the employee is the contributor. Notably, the traditional pensions and the cash balance plans are excellent examples of defined benefit plans. According to Ivey (2012), some examples of the defined contribution plans include 401 (b) and 403 (k).
A study that was done to investigate whether retirement is good or bad on the subjective well being found that the social and developmental contexts influence a person’s retirement experiences and decisions, suggesting that retirement ought to be examined in its life course and ecological context (Jungmeen E. Kim, 2001) . The research found similarities and differences in the experiences of male and female retirees on marital quality and subjective well-being. Another study was carried out to investigate the impact of individuals retiring on their health as well as mental behaviors by comparing retired and unretired groups of people. The results showed that retired people were less prone to stress and more likely to engage in regular exercises than unretired counterparts. However, there were no significant differences in self-reported depression, coping, mental status, smoking, and alcohol consumption (Lorraine T. Midanik, 1995).
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References
Ivey, M. (2012, June 20). Differences between defined benefit and defined contribution plans . Retrieved from https://madison.com/ct/differences-between-defined-benefit-and-defined-contribution-plans/article_6330e4f2-ba3d-11e1-be9a-0019bb2963f4.html
Jungmeen E. Kim, P. M. (2001). Is retirement good or bad for subjective well-being? Current Directions in Psychological Science, 10 (3).
Lorraine T. Midanik, K. S. (1995, January 1). The effect of retirement on mental health and health behaviors: The Kaiser permanente retirement study. The Journals of Gerontology: Series B, 50B (1), S59-S61.
