retirement plan
Definition
Noun: A retirement plan is a financial arrangement designed to save and invest money during a person's working years, with the specific purpose of providing income after they stop working (retire).
Usage
A retirement plan is a long-term savings strategy. Individuals and/or their employers contribute money to the plan, which is then invested. The goal is for the money to grow over time so it can be used to cover living expenses during retirement.
Examples
- She enrolled in her company's retirement plan as soon as she was eligible.
- It's important to start contributing to a retirement plan early in your career.
- He reviewed his retirement plan with a financial advisor to ensure he was on track.
- A well-managed retirement plan can provide financial security in old age.
Advanced Usage
- Qualified Retirement Plan: A specific type of plan that meets U.S. Internal Revenue Code requirements, offering tax advantages to participants and employers.
- Examples include 401(k) plans and traditional pensions.
- Defined-Benefit vs. Defined-Contribution Plan: These are two primary structures for retirement plans.
- A defined-benefit plan promises a specified monthly benefit at retirement.
- A defined-contribution plan specifies how much money goes into the account today, with the future benefit depending on investment returns.
Variants and Related Words
- Pension Plan: Often used synonymously, though traditionally it refers specifically to a defined-benefit plan providing a guaranteed income for life after retirement.
- Superannuation (Common in AU/NZ): A compulsory retirement savings program.
- 401(k) (U.S.): A common type of defined-contribution retirement plan offered by employers.
- IRA (Individual Retirement Account) (U.S.): A retirement plan that individuals can establish independently of an employer.
- Annuity: A financial product often purchased with funds from a retirement plan to provide a steady stream of income.
Synonyms
- Pension scheme
- Superannuation scheme
- Old-age provision
- Nest egg (informal, refers to the savings themselves)
Related Phrases
- Retirement savings: The money accumulated within a retirement plan.
- Retirement account: The specific holding (e.g., a bank or brokerage account) for retirement plan assets.
- Contribute to a retirement plan: To add money to the plan.
- Vest in a retirement plan: To earn the right to the employer-contributed funds in the plan.
Noun
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a plan for setting aside money to be spent after retirement
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