The correct answer is: C. Both A & B
Defined benefit (DB) pensions promise to pay a certain amount of money in retirement, usually based on a worker’s salary and years of service. Defined contribution (DC) pensions, on the other hand, do not promise a specific amount of money in retirement. Instead, they are funded by contributions from the employee, the employer, and sometimes the government. The amount of money that a DC retiree receives in retirement depends on how much money is in the account at retirement, which is affected by the investment performance of the account.
Both DB and DC pensions have fallen into trouble in recent times. DB pensions have been hit by a number of factors, including the decline in interest rates, which has made it more expensive for companies to fund their DB plans. DC pensions have been hit by the stock market crash of 2008, which reduced the value of many DC accounts.
As a result of these problems, many companies have either frozen or terminated their DB plans. In addition, many workers are not saving enough for retirement, which means that they may not be able to afford to retire when they want to.
Here is a brief explanation of each option:
- A. Defined Benefit type
A defined benefit (DB) pension is a pension that promises to pay a certain amount of money in retirement, usually based on a worker’s salary and years of service. DB pensions are funded by the employer, and the amount of money that a retiree receives is not affected by the investment performance of the plan.
- B. Defined contribution type
A defined contribution (DC) pension is a pension that does not promise a specific amount of money in retirement. Instead, it is funded by contributions from the employee, the employer, and sometimes the government. The amount of money that a DC retiree receives in retirement depends on how much money is in the account at retirement, which is affected by the investment performance of the account.
- C. Both A & B
Both DB and DC pensions have fallen into trouble in recent times. DB pensions have been hit by a number of factors, including the decline in interest rates, which has made it more expensive for companies to fund their DB plans. DC pensions have been hit by the stock market crash of 2008, which reduced the value of many DC accounts.
- D. None of the above
None of the above options is correct.