What's are the differences between “defined contribution” and “defined benefit” pension plans?
Defined Benefit - the benefit you receive when you retire is defined e.g. $500 a month if you retire at age 65. It is up to the plan administrators to manage the pension fund, and ensure that there is enough money to cover the benefits based on the life expectancy of the retiree. Defined Contribution - the amount you contribute to the plan is defined. The benefit you receive at retirement depends on how well the investments do over the years. Defined Benefit Plans: Defined benefit plans are disappearing because of their high cost to the companies that provide them.  When an employee retires, the company must pay his pension for the rest of his life, even longer if the pension includes a survivor option.  Thus the company's financial burden grows as more employees retire.   By law, they must provide a fund that has sufficient resources to pay all present and future pensions.  Low interest rates, such as we have now, place a greater burden on the amount that must be in these funds.   For these reasons, most companies, including large ones like IBM and Lockheed Martin, have discontinued their pension plans and provide only defined contribution plans.   Defined Contribution Plans: These require the company to only make contributions while the employee is working.  Once the employee retires, the company's responsibility ends.  Usually these plans employ a 401K type savings plan for which the employee contributes and the companies matches some or all of that contribution.  Comparison: Although a fully company paid pension plan is the best, it is now almost unavailable.  The defined contribution plan, if it includes company matching, can be a viable alternative if the investments are chosen wisely and perform as expected.  Of course, this is not guaranteed but is probably the best option that most working people have at this time. In short, defined contribution plans yield different amounts of return based on the market whereas defined benefit plans yield predetermined amounts defined based on factors such as salary and years of service. As others have explained defined contribution is when you (or your employer) contributes a specified amount and you reap all the investment returns.  Defined benefit is when your employer promises to pay you a specified amount (benefit) and is responsible for making the necessary investments to provide for it.   Is one better than the other? We can argue this either way.   Defined benefit would seem to be more predictable and assured.  The problem being of course that it is entirely reliant upon the employer to have saved enough money to pay that amount.  If the employer fails in that responsibility, then the only fallback is government guarantees.  And of course the government has limitations on what it can guarantee.  For example, from Wikipedia:   The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans that end in 2016, workers who retire at age 65 can receive up to $5,011.36 per month (or $60,136 per year) under PBGC's insurance program for single-employer plans. Benefit payments starting at ages other than 65 are adjusted actuarially, which means the maximum guaranteed benefit is lower for those who retire early or when there is a benefit for a survivor, and higher for those who retire after age 65. Additionally, the PBGC will not fully guarantee benefit improvements that were adopted within the five-year period prior to a plan's termination or benefits that are not payable over a retiree's lifetime. Other limitations also apply to supplemental benefits in excess of normal retirement benefits, benefit increases within the last five years before a plan's termination, and benefits earned after a plan sponsor's bankruptcy. By contrast, people tend to control their own defined contribution accounts.  So they control how much gets invested and where.  Defined contribution accounts are always 100% funded.   Defined benefit pension plans are often underfunded.  They expect the employer to step forward and subsidize them when they run short.  This allows the defined benefits to both be cheaper during the employment period and more generous in retirement.  But it also means that employers have to subsidize the plans later, when they no longer get a benefit from the relationship with the employee.   If you want someone else to make promises to you and aren't worried that they won't keep them, you probably prefer defined benefit.   If you want to have personal control over the money, you probably prefer defined contribution.   My personal opinion is that defined benefit plans are a curse.  They encourage risky behavior and false promises.  Defined contribution plans are more honest about what they provide and better match the production of employment with its compensation.  Others see defined benefit plans as the gold standard of pensions.
On the face of it, it doesn't look like a very good deal - neither pension not annuity company are in it for the fun of it, so they'll take their cut from your money, and then invest it anyway. The rest depends on what they promise you - if they just promise you market returns then I don't see much sense to do it, you can do it yourself. If they promise you some pre-defined average return not depending on market conditions (and hope to get ahead by actually getting better return and pocket the difference) then it might make sense, if you are not a very proficient investor. This will get you a known benefit you can count on (at least if you get a company with good rating/insurance/etc.) without worrying about markets volatility and having to keep the discipline and calm when markets jump around. It may be hard, especially for somebody of advanced age.  Also, there's the part of government adding money - it depends on how much of it is added, is it enough to cover the extra fees? Alright, team!   I found answers to part 1) and part 2) that I've quote below, but still need help with 3).  The facts in the article below seem to point to the ability for the LLC to contribute profit sharing of up to 25% of the wages it paid SE tax on.  What part of the SE tax is that?  I assume the spirit of the law is to only allow the 25% on the taxable portion of the income, but given that I would have crossed the SS portion of SE tax, I am not 100%.  (From http://www.sensefinancial.com/services/solo401k/solo-401k-contribution/) Sole Proprietorship Employee Deferral The owner of a sole proprietorship who is under the age of 50 may make   employee deferral contributions of as much as $17,500 to a Solo 401(k)   plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up   contribution, bringing their annual deferral contribution to as much   as $23,000). Solo 401k contribution deadline rules dictate that plan   participant must formally elect to make an employee deferral   contribution by Dec. 31. However, the actual contribution can be made   up until the tax-filing deadline.  Pretax and/or after-tax (Roth)   funds can be used to make employee deferral contributions. Profit Sharing Contribution A sole proprietorship may make annual profit-sharing contributions to   a Solo 401(k) plan on behalf of the business owner and spouse.   Internal Revenue Code Section 401(a)(3) states that employer   contributions are limited to 25 percent of the business entity’s   income subject to self-employment tax. Schedule C sole-proprietors   must base their maximum contribution on earned income, an additional   calculation that lowers their maximum contribution to 20 percent of   earned income. IRS Publication 560 contains a step-by-step worksheet   for this calculation. In general, compensation can be defined as your   net earnings from self-employment activity.  This definition takes   into account the following eligible tax deductions: (1) the deduction   for half of self-employment tax and (2) the deduction for   contributions on your behalf to the Solo 401(k) plan.  A business   entity’s Solo 401(k) contributions for profit sharing component must   be made by its tax-filing deadline. Single Member LLC Employee Deferral The owner of a single member LLC who is under the age of 50 may make   employee deferral contributions of as much as $17,500 to a Solo 401(k)   plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up   contribution, bringing their annual deferral contribution to as much   as $23,000). Solo 401k contribution deadline rules dictate that plan   participant must formally elect to make an employee deferral   contribution by Dec. 31. However, the actual contribution can be made   up until the tax-filing deadline.  Pretax and/or after-tax (Roth)   funds can be used to make employee deferral contributions. Profit Sharing Contribution A single member LLC business may make annual profit-sharing   contributions to a Solo 401(k) plan on behalf of the business owner   and spouse. Internal Revenue Code Section 401(a)(3) states that   employer contributions are limited to 25 percent of the business   entity’s income subject to self-employment tax. Schedule C   sole-proprietors must base their maximum contribution on earned   income, an additional calculation that lowers their maximum   contribution to 20 percent of earned income. IRS Publication 560   contains a step-by-step worksheet for this calculation. In general,   compensation can be defined as your net earnings from self-employment   activity. This definition takes into account the following eligible   tax deductions: (i) the deduction for half of self-employment tax and   (ii) the deduction for contributions on your behalf to the Solo   401(k).  A single member LLC’s Solo 401(k) contributions for profit   sharing component must be made by its tax-filing deadline. "This is a fascinating question.  I am posting here only a partial answer because I haven't found official sources.  The upshot appears to be that a Puerto Rico IRA is a wholly different thing from a US IRA, and different rules apply.  This is said most succinctly in this post on the Boglehead forums: US federal tax code and Puerto Rican tax codes are separate. By contributing to a U.S. IRA, you defer US taxes. You need to pay these deferred US taxes, and take an early withdrawal penalty too, if you want to move the asset to PR. Other web pages give similar information, for instance, this post from ""Accountant Forums"": The Puerto Rico (PR) Internal Revenue Code (IRC) defines a Puerto   Rico IRA (I am assuming that this taxpayer has a PR IRA.). It is   unfortunate that they chose to use the same name as the US IRC   uses. A PR IRA is not a US IRA. It has different tax rules. In   addition, the US IRC defines an IRA as being ""a trust created or   organized in the United States."" The US IRC (Sec. 7701) defines   the United States as being the 50 states and the District of   Columbia. The Bogleheads thread also contains a link to a document from a Puerto Rican CPA school which appears to be a FAQ, and says (translated here from Spanish): Thus, any distribution from an IRA established in Puerto Rico does not qualify to be transferred to an IRA established outside Puerto Rico without the imposition of penalty and/or payment of corresponding income tax.  In the same way, the transfer of an IRA established outside Puerto Rico to one established in Puerto Rico also does not qualify as a transfer. It is not clear whether the exact meaning of ""transfer"" (given as either ""transferencia"" or ""traspaso"" in the document) corresponds to the US usage of IRA transfers (i.e., nontaxable events); some information I found indicates that the end of the quote above might be translated as ""does not qualify as a rollover"".  In any case, it seems that moving an IRA to or from Puerto Rico at least potentially has tax consequences.  There is also a previous question on this site which likewise says ""You cannot transfer or rollover an IRA that was established in PR to USA and vice versa"". These are not exactly authoritative sources, but they all seem to point towards the same conclusion, namely that you won't be able to avoid taxation on your IRA by moving to Puerto Rico.  Of course, I am no expert.  To be sure, you would have to talk to an accountant versed in the tax laws of both Puerto Rico and the incorporated US (and probably also whatever state you'd be moving from, to be on the safe side.)" No, it doesn't work like this. Your charitable contribution is limited to the FMV. In your scenario your charitable contribution is limited by the FMV, i.e.: you can only deduct the worth of the stocks. It would be to your advantage to sell the stocks and donate cash. Had your stock appreciated, you may be required to either deduct the appreciation amount from the donation deduction or pay capital gains tax (increasing your basis to the FMV), depending on the nature of your donation. In many cases - you may be able to deduct the whole value of the appreciated stock without paying capital gains. Read the link below for more details and exceptions. In this scenario, it is probably more beneficial to donate the stock (even if required to pay the capital gains tax), instead of selling and donating cash (which will always trigger the capital gains tax). Exceptions.   However, in certain situations, you must reduce the fair   market value by any amount that would have been long-term capital gain   if you had sold the property for its fair market value. Generally,   this means reducing the fair market value to the property's cost or   other basis. You must do this if: The property (other than qualified appreciated stock) is contributed to certain private nonoperating foundations, You choose the 50% limit instead of the special 30% limit for capital gain property, discussed later, The contributed property is intellectual property (as defined earlier under Patents and Other Intellectual Property ), The contributed property is certain taxidermy property as explained earlier, or The contributed property is tangible personal property (defined earlier) that: Is put to an unrelated use (defined later) by the charity, or Has a claimed value of more than $5,000 and is sold, traded, or otherwise disposed of by the qualified organization during the year   in which you made the contribution, and the qualified organization has   not made the required certification of exempt use (such as on Form   8282, Donee Information Return, Part IV). See also Recapture if no   exempt use , later. See more here. Use a compound interest calculator to project the difference with ETFs in the S&amp;P 500 (or the asset mix of your choosing), and subtract the expected pension amount. If the difference is positive, or around around even, I would do it to avoid the risk of company failure. "Pretty simple actually. This is a state-run defined benefit plan, where the benefit is calculated based on the length of the employment and the contributed amounts. This is what in the US is known as the Social Security.  This is a defined contribution plan, where the employee can chose the level of risk based on certain pre-defined investment guidelines (more conservative or more aggressive). In Poland, it appears that there's a certain amount of the state-mandated SS tax is transferred to these plans. Nothing in the US is like that, but you can see it as a mandatory IRA with a preset limited choice of mutual funds to invest into, as an analogy. The recent change was to reduce the portion of the madatory contribution that is diverted to this plan from 7+% to 2.3% (on account of expanding the contribution to (1)). Probably the recent crashes of the stock markets that affected these accounts lead to this decision. This is voluntary defined contribution plan, similar to the US 401Ks. This division is actually pretty common, not unique to Poland. I'd say its the ""standard"" pension scheme, as opposed to what we're used to in the US." "Click on the ? icon next to ""Employer Plan"". This is used to determine if you can deduct your annual contributions from your taxes. For more information on how an employer plan can affect your IRA tax deduction, see the definition for non-deductible contributions. So, we look there: The total of your Traditional IRA contributions that were deposited without a tax deduction. Traditional IRA contributions are normally tax deductible. However, if you have an employer-sponsored retirement plan, such as a 401(k), your tax deduction may be limited.  The $20K difference between $272K and $252K just happens to be $15% of $132,500 which is the amount of your non-deductible contributions." Public sector and private industry retirement plans, taxation and estate planning would be the most substantial differences between the two countries. The concepts for accumulating wealth are the same, and if you are doing anything particularly lucrative with an above average amount of risk, the aforementioned differences are not very relevant, for a twenty something.