|
Thumb of Michigan | The good thing about a defined benefit plan is that there's a guaranteed income at retirement. There's a floor on the payment- but there's also a cap. You'll never draw anything over the guarantee.
Defined contribution plan obviously has no guarantees of payment- but there's no cap on it either.
All I'm saying is that if I had to choose between a DB or a DC plan, and I was young just starting a career, with contributions being the same annually in either one, and if the stock market mirrors the last 40 years for the next 40 years, the DC plan will have the potential to be more valuable. Maybe a lot more valuable.
The other consideration is portability. A 401k (or 403b or 457b) goes with you if you change jobs. A DB, usually not. I've never been in a position to make a Roth work, but I didn't start participating in any retirement programs till I was in my 30's. Started contributing to an IRA, then a 401k, then had a pre funded DB plan for a few years, eventually rolled that into a 401k.
If one has a low tax rate now, I think a Roth could almost be a slam dunk, without having the benefit of a crystal ball looking forward to ones retirement age and after.
There's a place for both DB's and DC's, and the favorite one is usually a matter of personal choice. I don't mind rolling the dice a little bit, a DC does that. | |
|
Roth 401k or traditional?
