The term “pension plan” can be another term for retirement plan. There are various types of pensions. The most commonly referred to plans are employment-based pensions where the employer is either partly or fully responsible for the amount of funds the employee will receive upon retirement. There are also disability pensions for individuals who suffer from some type of injury or disability. Social Security is also somewhat of a pension plan. Two common types of employment-based pensions are defined contribution and defined benefit plans.
What is a Contribution Pension Plan?
Over the past 20 years, defined contribution pension plans have become quite popular among employers. Employers often offer their employees a wide array of investment choices that include stock in the company, 401(k) plans, and more. Employees have plenty of control over their investment options and employers typically have some sort of matching contribution as well.
Different employers handle the concept of matching differently. A typical matching formula is for an employer to match 50% of the employee’s contribution up to 6% of his or her salary. If your defined contribution plan is a 401(k), which most types of these plans are, then all contributions are tax-deferred until you reach the age of retirement.
What is a Benefit Pension Plan?
Although defined contribution plans have become more commonplace in recent years, defined benefit plans are the type of pension plans most people think of when the general term “pension” arises. Because 401(k) plans were not even in existence until the early 1980s, most employers offered defined benefit plans.
The amount of money you receive upon retirement again will vary from employer to employer. Typical examples are Dollar Times Service plans and Career Average Pay plans. Defined benefit pension plans typically figure in variables such as the employee’s pay, how many years the employee has worked, the age of retirement, and more.
All things considered, upon retirement the employee will receive a set amount of money each month that will have been determined by his pay and years of service to the employer. Defined contribution plans are generally dependent upon the performance of a 401(k).
Adding Gold and Silver to a Pension Plan
If you have been seeking to diversify your retirement assets beyond that of company stock and the stock market in general, it may be time to add another layer of protection to your golden years. Pension plans can vary as some require a lump sum buyout while others may not provide an option for liquidation. American Bullion specializes in adding precious metals to your retirement portfolio. If you are considering adding gold or silver to your pension, call us today at 1-800-326-9598 to discuss your options with a precious metals specialist.
References: Investopedia, Wikipedia