Employer or public retirement arrangement that funds future benefits for workers through contributions, pooled assets, and plan rules.
A pension plan is a retirement arrangement that accumulates or promises benefits for workers and then pays those benefits after retirement.
The exact design varies, but the core idea is consistent: contributions and plan rules are meant to turn working years into future retirement income.
The key split is between:
That distinction matters because it determines who carries investment and longevity risk.
Pension plans matter because they determine who bears retirement risk and how predictable future income will be.
some plans promise a formula-based benefit
others build an account whose value depends on contributions and investment performance
plan rules shape vesting, portability, retirement age, and survivor rights
tax treatment and retirement-income predictability differ by plan type
That makes the pension plan one of the most important structures in retirement finance.
Pension: The retirement income that may be paid from a pension plan.
Defined-Benefit Pension Plan: Pension structure based on a promised payout formula.
401(k) Plan: Employer retirement arrangement that usually works as a defined-contribution plan.
Pensionable Age: Age threshold that often affects when plan benefits can begin.