Question

1. How does defined benefit plans encourage retirement? Explain with an example
2. What are the reasons for using a rollover?
3. What are the basic financial requirements before you roll over your IRA into a ROTH IRA?

Answer 1

SOL;

Defined benefit plan is retirement prograame sposored by the employer under which the employee is guarateed an assured benefit based on his lenght of service .salary history.It is also known as qualified pension plan.this plan is called befit plan because both the employer and employee know the formula to work out the benefits ahead of post retirement peried.

Offering such scemes ,emplyees are benefited in terms attractive compensation packages and gives an oppertunity to realise the pros and cons of the prograame.

To tke an example ,the emplyees can well estimate the compensation package and plan the fund in better yielding investment schemes..Besides the income genrated from the plan assets are not subject to tax as the scheme is covered under Empoly Retirement Security and Act of 1974 and Internal Revenue code and qualify for significant tax advantages.