Pension: Retirement and Saving Plans
If you are contributing to any of the retirement plans such as a pension scheme, a thrift saving plan, a 401-k plan or any of the a profit-sharing plan, it is important to have a document that defines your contribution plan and the status of your account. The document should also describe what happens when you terminate your contribution plan.
Among critical documents that you should have is a summary plan description and the personal benefit statement, which shows whether you are vested as well as you total accrued contribution to the scheme. At the age of 65 years, your total contribution will make up your pension. You need to study all these documents thoroughly and in case you need some elaboration, you can talk to your human resource personnel. Avoid relying on oral promises and in case of any concern, you can write to your plan administrator to get a written explanation. In case don’t receive a convincing response, you can contact your layer.
Defined Benefit Plans:
Defined benefit plans are set after you agree to make a contribution of a defined amount of money monthly upon retirement. The total amount of retirement income is calculated using the formula based on the total amount of savings. Your employer is normally required to make a pension contribution fund are based on the estimation of the cost of benefit that you will receive in future.
Defined Contribution Plans:
Defined Contribution Plans is the amount of contribution that your employer contributes annually into your individual account for every employee. The total amount of contribution in your account keeps on changing due to due to investments gains and losses, which include interest as well as dividend payment. At retirement, you will be paid the total amount of money in your account as lump sum.
How termination can affect your plan:
Employer contribution to your retirement kitty will end upon your job termination, and you may not be able to increase your contributions. If you fail to secure another job for a long time, you may lose the entire benefits that had accumulated.
Before committing yourself to any pension plan, check to confirm whether there is any upcoming event that can help to boost benefit such as the date that you will secure more years of service. Check if there is way that you can remain on the payroll or any other way of obtaining an additional credit for an extra year of service to increase your benefits.
Photo Credit: Shutterstock/Billion Photos