What Is the Difference Between a 401(k) Plan and a Pension Plan?
The primary distinction between a 401k and a pension plan is that a 401k allows employees to contribute to their retirement savings account through payroll deductions. Employers sometimes match contributions. On the other hand, pension plans are employer-sponsored retirement accounts that pay out a set amount of money when the employee retires. Your salary, years of service, and other factors usually determine these payments. When considering a 401k or pension, it's critical to understand the costs. Contributions, returns, and management fees are the primary sources of plan costs. However, other expenses the employer bears, such as administration and recordkeeping fees, can impact the cost of a 401k. You should request a fee schedule outlining all the costs associated with your plan. Furthermore, inquire about service fees, which vary by the fund provider. Some providers charge fees for tax preparation, transferring assets from one 401(k) plan provider to another, and other servic