Defined-benefit Pension Plan
What is it? The traditional employer-sponsored pension. When you retire, you receive a predetermined benefit based on your salary and years of service. The amount is reduced if you retire before age 65. And if you are married, you will receive less because your spouse will continue to receive 50% of your pension after your death. You can get the full pension, however, if your spouse is willing to sign a waiver to his or her share. The pension replaces no more than 45% of your annual income before retirement. Since few companies give cost-of-living adjustments, your pension may seem meager by the end of your life.Traditional pensions have fallen out of favor with many companies. They are more expensive than defined-contribution plans such as 401(k) and 403(b) plans. Defined benefit plans also arent well designed for the modern mobile work force, since it generally takes five years to vest in the plan, and to attain a sizeable benefit you must stick with one employers for many years.Added By: Jayden
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