Pension
A pension provides regular income payments that you would receive for the rest of your life when you stop working--typically when people retire. A pension plan is a large pool of savings grows over time through contributions from workers or plan participants and their employer or plan sponsor. The plan assets are managed by professional investment managers, and most of the risks (such as investment risk) associated with managing plan assets will be assumed by the plan sponsor rather than plan participants. Particulars will vary from plan-to-plan. For example, there are variables such as how the money or contributions are set aside, who makes contributions, how the income is generated, when payments are made, the types of payments that are made, and how long pension payments last. The basic idea is that the longer you work the higher the payout. There may be tax breaks for pension contributions and there are limits on how much can go into a plan. Many pensions are payable to a surviving spouse on the death of the policyholder, and some pension payments are inflation-adjusted. The term pension is most often associated with defined benefit pension plans that provide regular, annuity-like payments to retirees. This is in contrast to defined contribution plans such as the 401k that shift most responsibilities onto employees and do not provide guaranteed lifetime income.
The Top Reasons to Consider an Annuity
Annuities are complex, largely misunderstood, and often misrepresented in popular financial media.
The reality, though, is that these financial products are becoming an increasingly important part of the financial plans of millions of people around the world. In fact, annuities are a vital component of the...
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Defined Benefit Pension Plans are Not Without Risk
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Pension Payout Versus Annuity
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Is it possible to take a potential lump sum retirement payout and find an
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How to Determine a Sustainable Level of Retirement Spending
What is the probability that a given level of spending is realistic or “sustainable” throughout one’s retirement?
Stated differently, what is the likelihood that a given level of retirement spending is fraught with...