In general terms, which one of the following plan types is the riskiest for an employee on a year to year basis? Defined contribution plan invested in fixed income securities Defined contribution plan invested in equities Final pay defined benefit plan Career average defined benefit plan Overfunded defined benefit plan



Answer :

The fact that the employer typically requires a minimum amount of service from the ultimate beneficiary is perhaps the most significant drawback of selecting a defined benefit plan.

Are pension plans superior to 401(k)s?

While both plans have advantages and disadvantages, pensions are generally regarded as superior to 401(k)s due to the fact that your employer bears all investment and management risk while you are guaranteed a fixed income for life.

In a plan with defined contributions, who bears the investment risk?

Employees contribute their own money to a 401(k) plan, a type of defined contribution retirement plan, and typically choose how the funds are invested. 4 The employer may match the employee's contributions. The employee is responsible for taking on the investment risk in defined benefit plans.

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