You’ve probably heard the terms “defined contribution” and “defined benefit” when it comes to retirement plans, but what’s the difference? Lockheed Martin employees are exposed to one of these types or even both depending on the hire date. Due to the higher administration costs, defined benefit plans are becoming few and far between as time has progressed. Some types of organizations such as government jobs and education institutions do still have such plans though, so they aren’t completely irrelevant just yet. While both are great retirement plans in their own right, we’ll explore the differences between them.

Defined Contribution Plan

  • Typically taxed as ordinary income when withdrawn (unless Roth option elected)
  • Most common type is a 401(k)
  • Lower administrative costs for employer
  • Employee is responsible for investment selection
  • Contributions are deducted from employee’s pay
  • Employer matching is sometimes available
  • Individual account per employee
  • More common than defined benefit plans
  • Required minimum distributions beginning at age 72


Defined Benefit Plan

  • Required minimum distributions beginning at age 72
  • Typically taxed as ordinary income when withdrawn
  • Employee is not responsible for investment selection
  • Employee is usually not required to make a contribution
  • Most common type is a pension
  • Less common than defined contribution plans
  • Benefit is based on a formula depending on factors such as years of service among others
  • Tends to offer survivorship options
  • Higher administrative costs for employer

Incorporating either a defined contribution plan or a defined benefit plan into a comprehensive financial plan is crucial since retirement can be the most challenging aspect to plan for. Worry not, however, now that you know how a defined contribution plan differs from a defined benefit plan, allow us to help you on your retirement journey regardless of what plan type you have! We have experience with a variety of retirement plans and are ready to assist. If you would like to attend one of our workshops, click here or book a free meeting with a Lockheed Martin retirement specialist to determine if our services can help you achieve your financial goals.

For more tips like these, click here to sign up for our weekly email blog newsletter. If you would like to get better educated on Lockheed retirement strategies, click here to download our Free Report titled Retire with Confidence: The Top 4 Things You Can Do Now to Maximize your Lockheed Retirement. And, if you want to have face time with a Lockheed Retirement Specialist², you can click here to schedule an appointmentclick here to sign up for our Lockheed Retirement Workshop or click here to just give us a call (817) 210-3444.

Be sure and check back next week for more incredibly valuable information. Cheers!


Financial Planning and Investment Advisory offered by SWMG, LLC a Registered Investment Advisor.

Lockheed Martin Retirement Specialist is not an official title or professional designation nor is it conferred by Lockheed Martin on any individual or company.

Our Complementary consultation and free report are for informational purposes only and provided free without any obligation to utilize or retain our investment advisory services.

SMWG, LLC is not affiliated with or endorsed by Lockheed Martin Corporation. Our expertise comes from working with LMT employees for several years and helping them to retire with confidence.

Investing involves the risk of loss, including loss of principal. Past performance does not guarantee future results. Investment products are not FDIC insured, have no bank guarantee, and may gain or lose value. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable for a client’s investment portfolio.