Are Pension Plans Dying Out?

Written by: Seth Rogers

Retirement plans are declining in popularity because new ways to save for retirement are evolving. You may have considered saving or investing in stocks outside your pension. The stock market goes up and down every day and is not guaranteed. Never put all of your money into one stock. If your company offers a retirement plan, it is a mistake not to participate.

Pension plans were, at one time, an excellent way for you to save for retirement, which ensured a monthly income after you retired. Pension plans offered at most companies years ago were a typical retirement plan. You could add money to your pension plan through payroll deduction, and your employer added a portion to your pension plan by matching your amount or by adding a lesser amount of money each time you got paid.

An employer offered excellent pension plans and helped the employee maintain this plan as long as the employee stayed with the company. Sometimes a pension plan is managed by an organization such as a union. Sometimes pension plans are maintained by both the union and employer. Pension plans guaranteed you a sizeable monthly income in addition to your Social Security.

Most companies no longer provide pension plans guaranteeing a monthly income when you retire. Most companies are becoming pressured to increase their finances; thus, in the early 2000s, companies began freezing pension benefits.

The money you and your employer add to your retirement fund becomes invested funds invested for you, and the earnings you paid into your pension plan build a monthly income over the years for you when you retire. When you retire, you can have a sizeable monthly pension payout.

Most large companies, such as Sears, utility companies, and hospitals, are slowly eliminating pension plans. Some of these companies began phasing out pension plans years ago unless you work for the government, the postal system, or the railroad; you are fortunate to get a pension plan. Employers calculated a pension plan by considering the length of time you worked for your employer and your annual income to your retirement.

Guaranteed Income

As the cost of living continued to increase faster than annual wages, employees did not believe that a pension would be enough money to live on when they retired. Employees had to figure out if their pension plan was going to sustain them after they retired.

Other ways for the employee to save for retirement were born into existence when pension plans began to fade. Employees began to believe that perhaps a 401K offered them more benefits and was better than a pension plan. Employers generally matched the employee dollar for dollar every time they got paid. This amount went into a retirement account called a 401K. The problem is that many pension plans proved underfunded to do the employer any good at retirement.

An employee cannot access the money they put into a pension plan for an emergency until the employee reached the age of 55-years. At the age of 55, you can withdraw 25% of your pension fund. However, there is no flexibility in these plans. And, withdrawing money from a pension plan before the age of 55 means that you have to pay taxes on the amount withdrawn. Pension plans provide you with tax relief depending if you are a high rate taxpayer or basic rate.

Lose Your Vested Interest?

There is always a risk of being fired, laid off, and changing employers. In the event this happens, you do not lose the money invested in your plan. Your pension plan is yours to keep.

The current 2020 year shows that over 50 percent of the populace does not have enough money at retirement to enjoy retirement. The income that you have by 2020 at retirement is Social Security income, and this income does not keep up with the cost of living. Retirees may live several years before they see a boost in their monthly income.

It is for this reason that more people are working past retirement age because they did not put money away through the years and lived check by check. The government never meant Social Security to be the sole income for retirees. People find that they may have just enough money to pay bills and keep food on the table, let alone save for retirement through a pension or other routes. Many of these same people find they must seek government help such as food pantries, food stamps, and Medicaid assistance.

The year 2020 shows at least 30 percent of retirees in the United States are incredibly fortunate to have a monthly income from a hefty pension plan in addition to income from Social Security.

The younger generation for many years lives for today. The majority of young workers do not think past their days to retirement because retirement is so far into the future. Many fail to set up a savings plan through a pension plan if they are fortunate to work for an employer who offers pension plans. Before these young people know it, they are turning 62 and never did set up a savings plan either through a pension plan or other savings plan.

In the 21st Century, you may no longer be able to choose a pension plan, 401K, or other savings plan. These days, the minority of workers work as a career military, law enforcement, the government, or education, to mention a few. The majority of employees work in private business sectors or are a business owner.

Consider Your Future

Thinking about your retirement makes a pension plan or other savings plan very appealing, as this guarantees you additional income with your Social Security. Finding a company that offers a pension plan and staying at that company until you retire is ideal. The chances are good that you become fully vested in the pension plan provided.

During your younger years in the workforce, it is ideal if you have a pension plan benefits, follow your Social Security involvement, 401K plans, and personal savings plans set you up for a perfect retirement.


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Are Pension Plans Dying Out?

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