Defined contribution plans provide that both the employer and employee will contribute a percentage of employees' wages to a pension fund each month, but the eventual benefits after retirement are dependent on employees' ability to manage their money.

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Defined contribution plans do not guarantee a specific retirement benefit like defined benefit plans do. Instead, the ultimate value of the retirement account is dependent on how well the investments perform over time. Employees are responsible for managing their retirement savings and making decisions about how to allocate their contributions across various investment options.

Defined Contribution Plans Provide That Both the Employer and Employee