How does pension works?

[deleted390966]

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[Sparda29]

http://www.iravs401kcentral.com/pension-vs-401k-what-are-the-differences/

http://wiki.fool.com/Difference_Between_Pension_Plans_and_IRA

Example. One of my former co-workers worked for the state hospital as a pharmacist for 30 years. He retired and now collects a pension. His pension plan from the employer was that they pay 60% of his final year's pay, he made like $140k in his last year so 60% of that is his annual pension that he gets paid no matter what.

He also had an IRA set up but he's not tapping into that. He's currently working full-time at another hospital, earning 140k/year and plans to retire after 6 years from there to collect a pension from them too.

 

[M0df]

Here or UK/Germany? Kidding though. Most places don't have pensions anymore, so this is less and less relevant. In some cases, you don't need to contribute and it is all employer. The money becomes yours when you hit certain age or time with the company.

 

[BidingMyTime]

I have heard people on SDN say that they save a percentage of their income for pension, while some say that "you put in 50% and your employer puts in 50%". So which is true? Is pension entirely your money or does your employer contributes, too?

What you are talking about is NOT a pension....a pension, which nobody gets anymore except government employees, is the employer guarantying a portion of the employees salary after they have worked for so many years for the company. Usually, the employee does not have to contribute anything as part of this plan.

What you are talking about is an IRA/401-K/401-B/etc....an individual savings account for retirement. Whether or not your employer puts anything in, depends on your employer. The 50/50 match is common, but only goes up to a certain percentage of income (like 5% of income for example.) Government laws are regulate how much percentage of income anyone can put into their retirement plan, and whether or not the retirement plan is "tax-deferred" or not depends on the kind of plan it is (most employer plans would be tax-deferred.) So whatever you hear people saying about IRA/401-K-/401-B is true for them, but it may not be true for you, because there are so many different plans available.

 

[MatCauthon]

Pensions are under attack from every angle right now. Look at current news stories of government pension plans in Detroit and California. Kaiser recently wiped out the pension plan for all new employees. I don't know any hospitals in my area that have a traditional pension anymore.

Most of the pension plans I see now are 401k pension plans where the employer gives 8-12% of an employees income into a 401k. These can be good, but obviously not as good as a pension plan that guaranteed income after retirement. I honestly wouldn't expect to receive too many benefits on a pension plan 30 plus years down the road anyway. My state is constantly in court to trim the state-pension fund down. The fat-cats have already been gutted, but their pensions are still a major drag on taxpayers. All it will take is a major city or state bankruptcy to eventual gut the rest of the generous benefits these retirees are getting. Some people were retiring at 55 and gettting 50-60% plus of their income for life (with COLA increases every year). A lot of them cashing out vacation and sick-days to make their final pay even higher.

 

[bacillus1]

I currently have a pension through the FERS system (government employee). About 3% of my paycheck goes to it. When I use the FERS calculator, it shows that I only get about 40k a year pension if I put in 30 years of service. Not even sure if this 40k is taxed or not.

 

[npage148]

Pension? Let me ask my grandfather how they work