A contracted in money purchase pension, or CIMP for short, is a type of pension plan that is offered by some employers to their employees. This type of plan is also known as a defined contribution pension plan, and it allows employees to build up their retirement savings over time.
In a CIMP, the employer and the employee both contribute to the plan. The contributions are typically invested in a range of assets, including stocks, bonds, and other financial instruments. The goal of the plan is to grow the assets over time, so that the employee has a substantial nest egg when they retire.
One of the key benefits of a CIMP is that the employee has control over how their contributions are invested. This means that they can choose investments that are aligned with their personal financial goals and risk tolerance. Additionally, CIMP plans are typically portable, meaning that employees can take their funds with them if they switch jobs.
Another benefit of a CIMP is that the employer is typically required to match the employee`s contributions up to a certain amount. This means that the employee is essentially getting free money, which can be a substantial boost to their retirement savings.
There are some downsides to CIMP plans, however. For one, the investment returns are not guaranteed. If the investments do not perform well, the employee`s retirement savings may not be as substantial as they had hoped. Additionally, the employee is typically responsible for managing their own investments, which can be daunting for those who are not experienced in finance.
Despite these drawbacks, a CIMP can be a great way to build up retirement savings over time. If you are offered a CIMP plan by your employer, it is important to carefully consider your investment choices and make sure that you are taking advantage of any matching contributions offered by your employer. With careful planning and smart investments, a CIMP plan can help you build a comfortable nest egg for your retirement years.