Pay As You Go Pension Plan

AAA

DEFINITION of 'Pay As You Go Pension Plan'

A retirement scheme where the plan beneficiaries decide how much they want to contribute either by having the specified amount regularly deducted from their paycheck or by contributing the desired amount in a lump sum. A pay as you go pension plan is similar to a 401k. The employee can choose among the various investment options and decide on whether they want a higher return by investing in a more risky fund or a safer fund which provides steady returns.

INVESTOPEDIA EXPLAINS 'Pay As You Go Pension Plan'

When retirement age comes along, the beneficiary can choose to either receive the benefits in a lump sum or as a lifetime annuity where the benefits are spread in monthly payments throughout the beneficiary's lifetime. This is different from a fully funded pension where the company fully funds, manages and distributes the benefits at retirement.

RELATED TERMS
  1. Unfunded Pension Plan

    An employer managed retirement plan that uses the employer's ...
  2. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  3. Lump-Sum Distribution

    A one-time payment for the entire amount due, rather than breaking ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
  6. Civil Rights Act of 1964

    Landmark federal legislation that prohibits discrimination on ...
Related Articles
  1. Retirement

    What are the differences between a Pay As You Go plan and a 401(k)?

    Compare a 401(k) plan with a pay-as-you-go pension plan; both offer investment flexibility and control by the participant but have a few slight differences.
  2. Retirement

    Keeping Track Of Retirement Plan Assets

    Maintain records of your pension benefits or risk losing them.
  3. Savings

    3 Common Excuses For Not Contributing To A Retirement Plan

    If you're not participating in your employer-sponsored retirement plan, there may be some easy solutions.
  4. Taxes

    3 Retirement Account Rules To Know

    Stay up-to-date on regulation amendments to avoid penalties as well as take advantage of new opportunities.
  5. Retirement

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.
  6. Taxes

    How To Save More For Your Retirement

    The Economic Growth and Tax Relief Reconciliation Act of 2001 made it easier to prepare for the future. Will you be ready?
  7. Budgeting

    The Demise Of The Defined-Benefit Plan

    Experts are making bleak predictions for your post-work years. Be prepared and plan for your future.
  8. Fundamental Analysis

    What is the difference between revenue and profit?

    Understand the difference between revenue and profit, two key concepts in business accounting, including where each can be found on an income statement.
  9. Fundamental Analysis

    What is the difference between revenue and sales?

    Learn to distinguish between a company's revenue and its sales, and see why the distinction is important when analyzing a company's financial performance.
  10. Fundamental Analysis

    What is the difference between revenue and income?

    Understand the difference between income and revenue, how these terms are often confused in day-to-day usage and how to identify each on an income statement.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center