Do employer pension plans still exist? I work for a company whose owner is a nice older gentleman. He built his company from the ground up decades ago and provides us with a pension package in addition to my 401k option. My question is, in the news I have seen a lot about people who embezzled from the funds or companies that no longer offer the pensions. Do most people rely on 401k and other retirement now, or do employers still offer the traditional pensions?
I haven't heard of too many people talk about them as of late when discussing their benefits. It seems like everyone is pretty much under the notion that they will have to establish and grow their own retirement funds, since the chances of staying with one company long enough to garner a pension is next to impossible nowadays. On a personal note, I don't even understand the worth of a pension due to the fact that most of them don't allow you to designate a beneficiary outside of a spouse. When my mother passed, the pension died with her and just thinking about how that money pretty much goes back to her employer just gnaws at me. Maybe it was just the type her company provided, please let me know if I'm wrong on how the average one works.
Pensions are becoming less and less common. Defined contribution plans are better for the employer IMO, and also offer diversification for the employee. If you don't have a pension at work, you can consider dropping a lump sum into a better variable annuity that offers an "income for life" option, with options to continue the payments to beneficiaries or the option to offer a lump sum death benefit.
JR, are the companies that still offer pensions, allowing people to make the choice between that and the annuity that you speak of? I'm wondering if that was something that may have been offered to my mother and the people she worked with, but they never thought do it or didn't consider the better benefits of the change.
No, the annuity is something you'd do on your own. The only catch is that fees are on the high side with annuities. But it's tax-deferred and skips probate since it's an insurance product and not part of the actual estate. It's also shielded from creditors and lawsuits. There's also a surrender period of several years with annuities - there are penalties for withdrawal above a certain amount each year for the first few years.
So, how would one take the money that would normally be offered in a company pension and route it to an annuity? How would you approach your company to make this request? Oh, and thanks for answering this for me.
No, you'd do this on your own with personal savings outside of your work plan. I'd start by shopping insurance companies. Better companies include Lincoln, Prudential, Met Life, Nationwide, and Jackson. Most have minimums in the $50-100k range.
They used to exist, but now we better start doing them on our own because when we reach retirement age there will be nothing left for us.
They do, but they are becoming pretty rare in the private section. The 401K and similar are more common. The company I work for had a Defined Benefits plan for a long while, but ended it and gave the funds required to full vested employees (like yours-truly) to put in an IRA. My wife works in the public sector (education) and she has a pension plan and a 457b.
All the companies that I have worked for only offer IRAs/401k. If there is a pension plan, they sure like to keep quiet about it. I wonder why that is?
