Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours or working a job while retired. The retirement industry standard at one time was a Defined Pension Benefit Plan, employer sponsored plan that guaranteed a specified benefit level (pension) at the employee’s retirement date. The Federal Government has defined pension benefit plans and defined contribution plan called the Thrift Savings Plan. Some state and local governments may also have defined pension benefit plans, but many have defined contribution plans.
Today, over 95% of retirement plans have converted to Defined Contribution Plan, whereby the employee contributes a portion of their salary to the plan and the employer has a flexible, discretionary employer matching contribution. The most common is the 401(k), a tax-qualified plan with retirement savings contributions provided (and sometimes proportionately matched) by an employer, deducted from the employee's paycheck before taxation. Contributions are tax-deferred until withdrawn after retirement or as otherwise permitted by applicable law.
