Learn How to Get a Pension
Having a pension is good for your retirement.
As you plan for retirement, you may want to figure out how to get a pension. There are essentially two ways to get one: Find an employer who offers a pension, or figure out a way to create your own.
What Is a Pension?
A pension is a source of guaranteed retirement income provided by an employer to employees who have qualified for this benefit. To be eligible for a pension benefit you usually need to work for an employer for a certain number of years (that number can vary).
Your pension benefit usually increases as you accumulate additional years of employment with that employer. Pensions are also referred to as “defined benefit retirement plans” as they are designed to define the future retirement benefit that you receive.
Getting a Pension Through an Employer
To get a pension, you can seek employment with an organization that offers pension benefits and then work there long enough to become eligible for these benefits.
Many government jobs, both at the federal and state level, offer pension benefits. Some examples of these types of jobs include positions with the military, police, and fire departments. However, some states have stopped offering pension plans to new employees.
Large private corporate employers may also offer pension benefits, but it's not as common as it used to be. Ask a prospective employer if they offer a pension and what you need to do to become eligible for it.
It's important to note that 401(k) benefits are not the same as a pension. With a 401(k) you must contribute your own money to the plan, and the employer may make a matching contribution, and/or a profit-sharing contribution. With a 401(k) plan, you are responsible for the decisions about the money inside of the plan. If your employer offers a 401(k), but not a pension, one possibility is to use your 401(k) money to create your own pension benefit when you retire.
Creating Your Own Pension
When you retire, you can use your own savings, such as money in a 401(k) plan or IRA, or savings that are not in a retirement plan, to buy an immediate annuity, which would pay you a guaranteed income for the rest of your life. In this way, you can create your own pension.
Delaying the start date of when you begin your Social Security benefits can also be a way for you to create a larger stream of retirement income for yourself. For example, if you retire at 66, you can use savings to buy an annuity that provides guaranteed income for four years. You can then begin receiving your Social Security benefits at 70, which would pay out a much larger amount than if you began taking them at 66. That's because your contributions would have more time to grow, and there's more money to pay out in less time.
Pensions and Your Spouse
Consider your spouse when you make pension choices if you're married, whether you get a pension through an employer or create your own.
You can choose whether your pension will pay out a benefit for your life only, or you can go with a joint/survivor option, which will pay out a monthly amount for as long as either of you or your spouse lives.
There are many options available to you as you plan your retirement, and a pension is only one of those options. If you want to find out more about the opportunities available to you then it's wise to consult a financial planner for help.