Defined Benefit Plan
A defined benefit (DB) plan is the traditional "pension" where the employer bears the investment risk and guarantees a specific benefit amount at retirement. This contrasts with defined contribution plans (like 401(k)s) where the employee bears the investment risk and the retirement income depends on account balance. DB plans are governed by ERISA in the private sector and insured by the PBGC.
Example
An employee with 25 years of service and a $90,000 final average salary in a plan with a 2% multiplier would receive: 25 × $90,000 × 0.02 = $45,000/year ($3,750/month) for life.
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Contractor vs Employee Compensation
Contractors typically need to charge 40-70% more per hour than the equivalent employee hourly rate to achieve comparable take-home pay, because they cover self-employment tax (15.3%), health insurance, retirement, PTO, and business expenses themselves.
Employee Salary Equivalent
An employee salary that matches your contractor income is typically 25-40% lower than your contractor gross, because the employer covers half of FICA taxes, provides benefits, and gives paid time off that you currently fund yourself.
Health Insurance Cost Estimation
Health insurance costs most Americans between $200 and $1,800 per month depending on age, location, income, and coverage type. The Affordable Care Act (ACA) marketplace provides subsidies (premium tax credits) that reduce costs for people earning between 100% and 400% of the Federal Poverty Level (FPL). For 2026, the subsidy formula is: Premium Tax Credit = Second Lowest Cost Silver Plan premium minus (your income times your applicable percentage, which ranges from 2.1% to 9.96%). Employer-provided coverage averages $9,325/year for single plans, with employers paying roughly 79% of the cost.
Pension Benefit Estimation
A defined benefit pension pays a guaranteed monthly income for life, calculated as: Years of Service × Final Average Salary × Benefit Multiplier. A typical 2% multiplier over 30 years replaces 60% of your final salary. Only 14% of private sector workers still have access to a pension (2025), but 86% of public sector workers do.