Posted by: Garcia & Cuadra, PA | September 11, 2012

Pension Plans

When planning for a retirement, there are various avenues to pursue. Employers offer different ways save for the future and enjoy a health retirement. Between establishing a 401k and investments into the stock market, pension plans are something that most companies offer to their associates as a way to have money based on how one’s performance was or how much compensation is placed from the company itself. These plans are broken down into two categories: a defined-benefit and a defined-contribution plan. The difference between these two is to start within a benefit plan. This is where the employer promises a definite amount when the associate retires. The plan gives the worker the amount nevertheless on how the employee executed their job within the company. The other pension, a contribution plan, is in contrast of the previous path. The pension is has predefined contributions made for the associate; however, the final, overall total is defined by how well the employee performs.

To point out, these pension plans aren’t transferable when switching between jobs nor are accessible until the person has reached the retirement age. Even though the company is investing into the worker’s retirement, it’s the associate’s responsibility to account for the pension in the end.  Leaving the company early, for example, will cut back from the matured amount of what should be in the end. Taxes are also being taking into justification when a pension is being accumulated; it is being taxed for every penny that has been accrued over the period of time.

In the long run, planning for a retirement can be a tricky situation. Knowing what to do and how to get there is the first thing to consider before signing onto anything. While the company will invest into one’s future, be sure to know how it works before assuming there will be a hefty amount left in the end. Pension plans are just one step into a better retirement after a long and fulfilling lifetime of working.


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