Think about it: not only do you have a secure retirement, but you don’t have to worry about everything else.
Pensions allow you to take the best of both worlds. Your company keeps its income flowing while giving you more control than ever before. Just because the benefits are paid through a traditional pension doesn’t mean they have to stop work.
You can continue working and your company covers your income. If you decide you want to retire, you can do so while still receiving the pension payments your employer would have provided.
No matter how old you are, when the time comes to retire, you can do so with the help of your current employer. So here’s what’s really important.
Benefits from a traditional pension only come if you’re working. If you retire, you have nothing to fall back on except income from social security. It is possible to defer benefits from Social Security, but it does require an additional year of deferral.
Rethinking pensions Unfortunately, once the formula changed in 1983, to index to changes in the real CPI, there is no guarantee of benefits for people who were under the full retirement age when the changes were implemented.
Now, people who were then 55 have a couple of options: draw down their funds, or work until 70 and continue receiving income from the pension.
Now, many companies are asking employees about options that encourage them to work longer. These include some versions of healthcare coverage, and even matching 401(k) contributions, which might entice your employer to keep you on the payroll longer. You can still take benefits from your old employer by working until 70.
But the benefits stop at full retirement age.
So what can be done?
First, employers should adopt the best practices of private companies that have been offering retiree benefits for a long time.
That means flexibility in terms of when and how you quit, plus no reduction in payments for leaving early.
You need to understand that Social Security should not be the only source of income you take from your old employer. When you take benefits from a company that is paying you, you can get them without much problem. You just need to make sure you have covered up any shortfall.
If you plan on retiring at any age, there are ways to check your expected life expectancy. If it is lower than your current age, you should take advantage of them before you retire.
And of course, you should know if your employer has a career income plan in which there are no charges.
This would be the best option if you’re a person nearing retirement age, or you have health problems. Another option is a pension that requires contributions of 3 percent to 5 percent of wages, with a cap on your payments.
This type of pension has a high benefit for both the individual and the employer. You also have less risk. How the cost of calculating pension benefits is calculated is debatable, but if you’re wealthy, you’ll be willing to pay.
And the other option is a lump sum.
This would be paid over a fixed period of time. But if you fail to meet your obligations, the result is the cancellation of your pension.
This type of pension is available to employers that give permanent benefits, such as Social Security. Check with your employer.
You should find the right benefits for your family, savings and specific living circumstances. If you have a need to pass the money on to family members, you should work with your human resources department.
Also, not everyone can work until 70. For example, you may need to work until 70 to support yourself in retirement and your partner in his or her retirement. There are ways to get around the age.
For example, the employee can get medical or terminal care in the hospital when someone is 66 and still in his or her pension plan.