What are the advantages and disadvantages of a defined-contribution plan like a 401k?

What will be an ideal response?

Answer: The big advantages are the tax-deductibility of your contributions, the tax-deferred treatment during your working years, and the employer match if any. With wise investment decisions and consistent contributions an employee can accumulate a substantial amount of retirement funds over the long haul. Portability and vesting are also very important benefits since most younger workers will switch jobs throughout their working lives.

The big disadvantages are not knowing what your retirement income will be upon retirement, poor investment decisions and market swings close to retirement. Many people are not very sophisticated with investing and they choose investment options that are either to risky or to conservative for their life cycle stage. Many people don't contribute the maximum allowed to get the full benefits of the employer match or the maximum accumulation over time.