A pension plan is a financial arrangement that provides individuals with income after they retire from work. It is typically funded by contributions from both employees and employers during the employee's working years. The money accumulated in the plan is then invested to grow over time, ensuring that retirees have a steady source of income. There are different types of pension plans, including defined benefit plans and defined contribution plans. In a defined benefit plan, the retirement income is predetermined based on factors like salary and years of service. In contrast, a defined contribution plan, such as a 401(k), allows employees to contribute a portion of their salary, which is then invested for retirement.