Wise Certification Practice Test 2025 - Free Certification Questions and Study Guide

Question: 1 / 400

A defined-contribution pension plan means that upon retirement, the employee will receive?

Guaranteed payments for life

A fixed salary

Tax and penalty fee

A variable amount based on contributions

In a defined-contribution pension plan, the retirement benefits an employee receives are based entirely on the contributions made by both the employee and the employer, as well as the investment performance of those contributions. This means that the total amount available at retirement can fluctuate, depending on how much was contributed over the years and how well those investments perform in the fund.

Employees can typically choose how their contributions are invested, which introduces variability based on market conditions and investment choices. As a result, the amount available during retirement can vary significantly from one individual to another. This is distinct from defined-benefit plans, where the benefit amount is predetermined based on salary and years of service, providing a more stable income stream.

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