From the course: Planning for Retirement
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How do pensions work?
- If you work in the public sector, there's a good chance your employer offers a pension plan. And although it's much less common than before some companies offer pension plans as well. In this lesson, I'll share how pensions work and how to estimate your future benefits. A pension plan is a retirement program offered by your employer that guarantees an amount of income to you each month in retirement. Instead of offering an opportunity for you to invest towards retirement and take whatever's left in your account when you retire, the way a 401k or a 403B works, a pension plan provides a guaranteed income amount based on your years of service, your compensation and a percentage that they assign which is sometimes based on your age when you retire. Pension plans have a formula that they use to determine what your future benefit will be. For example, your employer's pension formula might look something like this: your…
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