DC-DB Pension Comparison

Defined contribution (DC) or defined benefit (DB) pension plan? Which one is better? It depends. One way to compare these two types of pensions is by how much the pensions are worth at retirement. However, the one that has the larger “value” at retirement may not be the better choice. The one that ultimately has the bigger payout depends on how long you live and how long the money lasts.

Both types of pensions have advantages and disadvantages. Only hindsight will determine which one was, or would have been, the better choice. Financial planners are a good resource to use when making your decision, but be aware, as they do not all agree on which one is the better choice, DC or DB. Just as you have a personal bias toward one type or the other, so do planners.

The decision you make is based on many factors. Use the DC-DB Pension Choice Comparison Worksheet to help evaluate your choice.