14,500+ participating financial institutions as of October 1, 2018. Phone support, online features, and other services vary and are subject to change. Third-party terms and additional fees may apply.
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The person or company who runs the plan - called the administrator - gives you information on the most important aspects of your pension, such as financial information, rules unique to your plan, and how to make changes to your account.
The Employee Retirement Income Security Act (ERISA) establishes standards and protection for pension plans.Īs a pension participant, your access to information about your plan is guaranteed under ERISA. Setting up a pension is voluntary for an employer, but the pensions themselves are subject to regulation after that step is taken. Your retirement fund depends on the size and frequency of your contributions and whether your employer matches them or offers other savings options, such as profit-sharing or stock ownership plans. You, your employer or both make contributions to this type of plan, creating an investment pool that's paid out at retirement. They include the more commonly known workplace retirement plans, such as the 401(k) and its variations. The employer usually funds defined benefit plans.ĭefined contribution plans are more common than defined-benefit plans. A monthly cash amount may be provided for, such as $250 a month, but a formula using factors such as your income, age and length of employment is more common.įor example, the pension benefit formula could be: one percent of your average salary for three years leading up to retirement, multiplied by the number of years you worked. One of the two fundamental types of pensions, a defined-benefit plan spells out what you'll receive as a benefit after retirement. Employee Stock Ownership Plan ( ESOP) and Profit-Sharing Plans.Simplified Employee Pension Plans (SEPs).Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRAs.An employer, an employee or a combination of both can fund pensions.
Because there are so many types of pension plans, it's important to understand the basics first before planning for your financial future.Īlthough the terms " retirement plan" and "pension plan" are largely interchangeable, pension usually describes a plan based around employment, whether it's through your employer for or a work-related organization like a labor union. When it comes to true savings, interest-bearing investments are the way to make money grow before you clock out for the last time. While some people still stash cash under their mattresses for retirement, the majority know there are more springs than savings under there.
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