Understanding retirement options requires that individuals to know which pension benefits they have. There are many different types of pension plans and every employer makes their own decision about which pension plan they will offer to employees. Whether it is a defined benefit plan or a defined contribution plan, employees must understand their benefits in order to properly plan for their retirement. A defined benefit plan is a pension that is funded by the employer and guarantees the employee a certain monthly payment upon retirement. The payment is either a set amount or an amount based on a calculation that includes factors such as salary, age and number of years employed. Another type of pension is a defined contribution plan which allows the employer and the employee to make contributions to a retirement account. The defined contribution plan is often a 401(k) plan that does not guarantee a certain amount of money per month and in many cases, the employee is responsible for deciding how the contribution is invested and how much of their own paycheck they wish to contribute alongside their employer.