DB or DC plan

[Katsmeow]

This is an example of where I think there is confusion.... Katsmeow says her DH had a DC plan that matched.... I would say that is a 401(k).... not a DC plan..

But she worked at a place that did have a DC plan... money set aside regardless of contributions... (heck, I do not think you could contribute to a DC plan)....

I thought that DC stood for Defined Contribution. A 401(k) is a type of Defined Contribution Plan:

Defined contribution plan - Wikipedia, the free encyclopedia

Examples of defined contribution plans in the USA include Individual Retirement Accounts (IRAs) and 401(k) plans.

 

[fritz]

Yes, first point - the plan participant is generally responsible to keep the plan administrator informed of address changes and once you apply for SS, the SSA will inform you of any DB benefits to which you may be entitled as a deferred vested participant.

Second point - I'll do some searching but I'm betting that those retired without DB income (which includes taking a lump sum from a DB plan) are a small minority on this site.

That 10 years worth of work at a large corporation making decent money for that time (and 20+ years of growing those funds after moving on) - the DB pension lump sum distribution offered @ 55 from the third buyout corporation was worth less than $30k (were no individual contributions). Wont see me championing DB programs in private enterprise anytime soon.

 

[mpeirce]

I have a questions for people.... I have seen a number of people talk about investing their DC money.... are you talking about a 401(k) match or a real DC plan

Now hold on, there are a variety of DC plans, but 401(k)s are definitely defined contribution plans.

My personal experience with 401(k) plans has been excellent.

My last company had a terrific 401(k). Good matching. Good Vanguard (and other) funds to choose from. A few years back they rolled out full trading privileges in the 401(k) for people who wanted it.

On the other hand, I've helped a number of relatives with their 403(b)'s (teachers) and they have been fairly atrocious. A poor selection of expensive funds to choose from. All I can figure someone in their unions were either really stupid or getting something on the side from the choices.

So yes, DC plans vary in quality as do DB plans. As does everything in life...

 

[Texas Proud]

Now hold on, there are a variety of DC plans, but 401(k)s are definitely defined contribution plans.

My personal experience with 401(k) plans has been excellent.

My last company had a terrific 401(k). Good matching. Good Vanguard (and other) funds to choose from. A few years back they rolled out full trading privileges in the 401(k) for people who wanted it.

On the other hand, I've helped a number of relatives with their 403(b)'s (teachers) and they have been fairly atrocious. A poor selection of expensive funds to choose from. All I can figure someone in their unions were either really stupid or getting something on the side from the choices.

So yes, DC plans vary in quality as do DB plans. As does everything in life...

Well, I guess I am wrong in my thinking....

I have always put the DC plan in a separate category as the 401(k)... IOW, it is a cash plan where the company puts money no matter what....

The 401(k) is usually set up where if you do not put in any money.... you have nothing... the company has not expense etc. etc....



So, like I said earlier... it matters what the numbers are... I would rather have a DB plan if all I have is a 401(k) with a max 3% match (which is what I have now)...


As to your comment on the 403s.... it could be both!!! (either really stupid or getting something on the side from the choices)

 

[nun]

Now hold on, there are a variety of DC plans, but 401(k)s are definitely defined contribution plans.

My personal experience with 401(k) plans has been excellent.

My last company had a terrific 401(k). Good matching. Good Vanguard (and other) funds to choose from. A few years back they rolled out full trading privileges in the 401(k) for people who wanted it.

On the other hand, I've helped a number of relatives with their 403(b)'s (teachers) and they have been fairly atrocious. A poor selection of expensive funds to choose from. All I can figure someone in their unions were either really stupid or getting something on the side from the choices.

So yes, DC plans vary in quality as do DB plans. As does everything in life...

The quality of DB and DC plans varies enormously. My state's DB plan is good after you get past the 10 year vesting. I also have access to 3 DC plans with my employer, 401a, 403b and 457 and the plans all have very different offerings. Some providers (the insurance companies, except TIAA-CREF) give bad and expensive choices and others are quite reasonable.

The 401a has a choice of Fidelity, TIAA-CREF, Valic and Lincoln Financial as providers. Fidelity and TIAA-CREF are both ok providing a range of index funds with ERs around 0.4%. The TIAA-CREF funds are structured as VAs which I've never understood as they are inside a tax deferred 401a already, but don't act like usual VAs, more like regular mutual funds, but you have the option to convert then to a traditional fixed or variable annuity on retirement.

403b is with Vanguard and I can buy any of their funds at the usual ERs. Other providers are Fidelity, TIAA-CREF and Valic

457 is with Great Western and has a good choice of funds from Fidelity, State Street, Pimco etc. The State Street index funds have ERs around 0.06%

 

[JoeWras]

The quality of DB and DC plans varies enormously.

And that's what makes the question hard to answer.

 

[web_diva]

As others have pointed out, it really has a lot to do with the plan offered.

I'm with Calico....with my db pension, I'm not going anywhere!! In my industry, I see very nice db pensions that are not-cola'd and no offer of healthcare. The company contributes at the agreed upon rate, and the employee has to contribute nothing. For employees working there for 25+ years, it's equivalent to an annuity of approximately $2-3M in its payouts.

Around 2007, the company stopped offering db pensions and instead offered dc pensions. The dc pensions were really just adding 2-3% more in the company match to the 401k.

So in this case, the dc is just no comparison. I see it again and again with friends...they're hired with a dc plan and then find out its paltry compared to the original db plan they just missed getting.

The db plans create a lot of uncertainty for megacorp. They do not know the payout option you will choose, how long you will live, and how long your spouse will live (if a payout option is chosen involving them).

The dc plans are much easier for them to afford and offer them a known amount on their books.

 

[growing_older]

The problem with DB plans is that the promises are not necessarily kept. I'd rather have the control of having the DC money attached to my name in a way that the employer cannot raid it, or lose it when going out of business. I'd love a DB payout, but getting it to the point it actually pays is a huge problem. Both of my previous employers with DB plans went out of business before I vested any benefit. But even when they were still in business, there was plenty of dark murmuring about longtime employees who suddenly got pushed out a few months shy of their 10 year vesting.