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Defined Benefit Plan

A retirement plan that employers offer employees based on salary and employment period at the employers risk. These funds cannot be received until the time of retirement. Notably, a Defined Benefit Plan will be paid to employees as a predetermined amount- opposed to a defined contribution plan which defines a contribution amount but not a benefit payment. Any shortages in retirement payments under a Defined Benefit Plan are ultimately made up by the employer or sponsor. Defined Benefit Plans are controlled by a plan sponsor who has decided to invest in retirement assets to earn returns on plan assets. Typically, plan sponsors will contribute money into stock and bond portfolios and allocate the majority of the portfolio to these types of investments. Another option for plans is real estate which can be owned directly by the plan or through real estate investment trusts (REIT) and other publicly traded funds. Investment in a Defined Benefit Plan for real estate makes for an excellent vehicle for retirement as it has predictable cash flows, provides protection against inflation, and often appreciates in the long run.

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