Pensions vs modern retirement
When you hear about retirement planning the words that tend to echo in your mind are the “choices you make now will play a big role in your life later on”. There are 2 main types of retirement plans, pensions and the modern retirement system. Both of these have different pros and cons, as well as different optimization strategies to get the most out of them. So lets look at pensions and modern retirement plans as well as a way for you to get the best of both worlds.
Pensions are percentage based retirement income plans that are correlate between the number of years that you have worked. These are most commonly found in public sector jobs, ie government jobs. Because pensions are based off of years of service these are ideal for people who want to stay with a single organization. The key benefit of pensions is that this income is guaranteed to the beneficiary. This is appealing as many view the stock market as carrying some risk. Money to fund the pension account is typically taken out of your paycheck and collected with many others. The main drawback to the pension system is that typically the wages are lower than private sector jobs, and it takes a very long time to accumulate enough service time to earn a significant amount of income. For those looking to draw the full maximum amount this typically takes at least 40 years of working, usually leading to a later retirement date.
