what is a pension? and how do i know if i get one or not???

Question

im trying to grow my wealth and prepare for the future. im 22, ihave a roth ira, 401k, and stock/bond investments, life insurance, ect... now im wondering what is a pension?

Answer 1

when you retire, that money that you are putting in your Roth, and your 401k, is your pension that you will draw out yearly! The one thing you have to watch on that is how much you contribute per year, because there is a maximum before you get penalized by the IRS! Your best informati0n on that will be your Tax preparer, or taking tax classes like I did, you learn a lot about investment, taxes, real estate, and personal finance! My classes were free,

Answer 2

A pension is a retirement plan offered by your employer. It typically provides for either monthly payments in your retirement, or gives you the option for a lump sum withdrawal when you first retire. Most pensions are not adjusted for inflation. But government and military pensions usually have some kind of inflation adjustment.

Your employer will tell you if it offers a pension. If in doubt, ask the employer. Most employers today don't offer pensions, because it puts the burden of financing your retirement on them, and they'd rather have it on you (which is what a 401(k) plan does).

If you want a pension, your best option is to get a government job.

Anyway, your finances are in good shape for someone your age. Just keep saving.

Answer 3

When people say "pension" they are generally referring to a traditional defined benefit retirement plan.

These provide a benefit to you at a set retirement age determined using a specific formula.

Examples would be:

$50/month per year of service

2% of pay per year of service

The benefit amount is payable for you lifetime starting at retirement age. A person who worked for 30 years for a company with the first formula would get $1,500/month for life ($50 x 30).

Most plans in the US require you to be 21 and have worked for 1 year to get into the plan. So you may have only become a member recently.

These plans are in decline in the US. Many sponsors are closing them to new entrants because of cost and lack of employee appreciation. The most likely employers to offer these now are government agencies, large utilities, and government contractors.

If you have a plan, the newest pension reform law requires your employer to send you a statement or notice that a statement is available annually beginning in 2008. You can find out right now by looking in your employer's benefit handbook or simply asking human resources. They will appreciate your interest.

Answer 4

In short, a pension is a fund that you pay into for X number of years. The money is invested and hopefully grows. Then, when you retire, the fund managers work out how long they expect you to live and you get a regular payment to replace your salary.

Do some searching on the net or speak to a financial advisor as there are hundreds of different types.

In short: It's money to live on during your retirement.