Benefit plans for future

[Madelyn Vernon]

They said benefit plans or rather a retirement plans are not only for older people. Although, I'm confused about how a pension plan differs from a retirement plan? Which among the two plans fits best with a long off retirement for the years ahead? Sorry to ask, but I would like to know if one of you here got a plan already? Please let me know your advice about it.

 

[JohnRippert]

A pension plan is money that a employer puts in to give the employee benefits after they retire. A retirement plan is money you put into a plan so that you have a retirement fund available to you after you retire. Most companys do not offer pension plans any more. I started putting 4% of my pay into a retirement account 30+ years ago on advice of my accountant father. I have been increasing the percentage over the years and I am now putting on 14% and any raises I get in the next 8 years or so until I retire will be added to that amount. I strongly recommend you put a good percentage into a retirement fund and increase the percentage any time you can.

I am lucky and my company has always offered a pension plan. If I retire at 62, between my pension, retirement savings and SS I should be making about 50K a year. That may sound like a fair amount but it goes out quick, especially with health care costs these days.

 

[Absalom]

John's explanation is excellent.

Basically, a pension plan is offered to you by your employer, if you're lucky. Generally, your employer, you, or both pay into it.

A retirement plan is something you have to set up for yourself. It requires a bit more careful planning, because clever financial products sales people at your bank or insurance may try to sell you stuff that brings them the highest commissions, rather than you the highest returns. It helps to educate yourself. There are "Retirement plans for Dummies"-type books; it's worthwhile reading up a bit.

 

[coltle6920]

A company can dump their pension plan in a heartbeat leaving you with little or nothing.You have no control whatsoever over a pension plan but you can control a retirement plan with some good advice.

After 35yrs with my employer I lost 60% of my pension when they decided to dump it in the hands of the govt (PBGC).Fortunately I was also in a 401K with Fidelity for almost the same amount of time.The closer I got to age 65 my plan automatically got more conservative.I have survived the last couple of stock market fiascos and have even recouped any losses.

They say it's never too late to start a retirement plan but I'd rather say it's never too early.

 

[swsig]

I stated working for the State of Texas at age 27. At that time I had to make a non-revokable choice: to go into the state's pension system (a "defined benefit" program), where my retirement income would be defined as a percentage of my highest salary; or to go into the Optional Retirement Program (a "defined contribution" program), where both the state and I would make monthly contributions to a tax-deferred insurance annuity for government employees, called a 403b (similar to a 401k for private sector employees).

Knowing that my salary would never be that large, I went into the optional program and invested in an annuity that was essentially a Fortune 500 stock index fund. As I neared retirement, I switched more of my retirement funds into a conservative, non-stock based, fixed annuity fund, similar to a bank savings account. The insurance company I was with allowed you to transfer between a variety of annuity funds, ranging from wildly speculative to very conservative. Long story short, over the next 40 years, the stock market did very well, and I ended up with far more retirement income than I would have had under the pension system.

You didn't say how old you were, but if you have many years until your retirement, and a modest salary, a tax-deferred investment in the stock market is a good idea, especially if you have an employer match for your contributions. If you have just a few years left and have a good salary, a pension plan (if available) might be best. But whatever your situation, it is never too late to set aside retirement money. It's not very comfortable living solely on social security benefits.

 

[Jst1mr]

John's explanation is excellent.

Basically, a pension plan is offered to you by your employer, if you're lucky. Generally, your employer, you, or both pay into it.

A retirement plan is something you have to set up for yourself. It requires a bit more careful planning, because clever financial products sales people at your bank or insurance may try to sell you stuff that brings them the highest commissions, rather than you the highest returns. It helps to educate yourself. There are "Retirement plans for Dummies"-type books; it's worthwhile reading up a bit.

Although I like to think of myself as reasonably intelligent, the language and particulars of the financial/investment world make my eyes cross and head nod immediately - I have zero interest in the subject, zilch, nada.

I tried to read enough to understand what was currently fashionable, and I was saving and investing a decent amount of my earnings, but had no confidence or sense of doing the best thing. I talked with a couple tax people and asked around town and found a small (2 person!) financial planning outfit in our VERY small town These guys come out to our house on whatever schedule we feel comfortable with, and have streamlined and improved our retirement portfolio into something we feel rock solid with. Some of the obvious items they "cleaned up" were downright embarrassing in hindsight, and missed opportunities were abundant. Saved enough from changes made at the very first meeting to pay their modest fee for a couple years plus.

Retirement sits pretty close for us, and the peace of mind that comes from knowing you have an effective plan that is ready to work for you is incredible. I wish I had enlisted some experts much earlier in the process!!

 

[old bear]

To those of you who have offered the excellent advice, Save Save and Save some more, thank you. I was forced into doing so years ago, soon it became a habit and source of pride. Now, at 68, I'm able to enjoy the back half of my life doing as I please, within reason. Sadly some of peers, age wise, are not as lucky.

To many folks are willing to trade tomorrow for today's instant gratification.

 

[Faulkner]

They say it's never too late to start a retirement plan but I'd rather say it's never too early.

I could not agree more.

Social Security was always meant to be supplemental, not the primary income in retirement. I've been putting 15% of my income into a 401K for 30 years and it's amazing what compound interest will do for you.

 

[THE PILGRIM]

Money you have control of is always better than money 'they' have control of.

 

[Tyrod]

Keep this in mind. Retirement funds, pension funds and even social security represent vast sums of currency. Swindlers, ie fund managers, companies, and even the government have a hard time keeping their hands off of your stack. I have all 3 things in my retirement and my income is far less than I expected.

 

[brigham33]

I'm 70 now. I have a comfortable income based on several sources: a small company pension, soc sec, rental income, and a long history of savings. None of them just "happened", you need to decide to forgo some of the pleasures of being young so that there are resources available when you are old.

Where you put your $ for fun makes a difference. I was a coin collector for many years, that produced profits. One of my younger family members is collecting tattoos. They are expensive, nice, and very "arty", but they will never be turned into cash when he wants some $. Everybody makes choices with their discretionary income, choose wisely.

 

[Onomea]

They said benefit plans or rather a retirement plans are not only for older people. Although, I'm confused about how a pension plan differs from a retirement plan? Which among the two plans fits best with a long off retirement for the years ahead? Sorry to ask, but I would like to know if one of you here got a plan already? Please let me know your advice about it.

Madelyn, my 31 year-old son was asking me similar questions about investing for retirement recently. I suggested that he read this article:

https://www.nytimes.com/2015/03/04/...etirement-but-one-change-could-help.html?_r=0

 

[hoc9sw]

Many years ago the company I was working for folded into another one, and sold off our earned pension benefits into an annuity company at a fixed rate. So what was really nice money in the description back then would not buy a month's groceries now.

We were left with the "opportunity" to invest in the new 401K "retirement" system. I did, but my value was literally wiped out in 2008 after about 25 years because all the investment options were ****. Since then, I've contributed enough to get almost to where I was in 2008 by scrimping to the bone each month.

I'll retire with grocery money, a bit of savings, and Social Security. Getting old is not for the weak.

 

[Faulkner]

I'm 70 now. I have a comfortable income based on several sources: a small company pension, soc sec, rental income, and a long history of savings. None of them just "happened", you need to decide to forgo some of the pleasures of being young so that there are resources available when you are old.

Where you put your $ for fun makes a difference. I was a coin collector for many years, that produced profits. One of my younger family members is collecting tattoos. They are expensive, nice, and very "arty", but they will never be turned into cash when he wants some $. Everybody makes choices with their discretionary income, choose wisely.

^^ Exactly right ^^

That is why part of my retirement portfolio includes my hobby of the past 25 years.

 

[Madelyn Vernon]

Thanks for the responses. The difference between pension and retirement funds has been sorted out. Anyway, the pension thing is being taken cared of by my employer. They deduct an amount from my pay and they contribute as well. I have been in the company for almost 9 years and it good to know that this is being dealt with accordingly.

As for the retirement plan, this is a service being offered by my bank. I have to pay a premium depending on my capacity and a fund manager will take care of this. I can start anytime and withdraw the amount after 10 years or I can choose to continue. I am also keen on what a huge private financial institution (PRU) can offer. I have also made some inquiry with a smaller financial company regarding their retirement planning services.

 

[johngalt]

Company retirement plans are not the only option. You can also open your own investment account and manage it yourself. You don't get the tax advantage of a 401k, but you have full control over it.