Pension Fund

Pension Fund Introduction

A pension fund exists to provide retirement income to an organization's employees through the pension fund administrator's ability to create stable growth over the long run.  Each year, funds are contributed to a pension fund in anticipation of future benefits which will be paid out as a steady stream of income to qualified employees.  A pension is an annuity which is guaranteed by your employer.  Pensions may be funded by any type of organization but most commonly by government agencies, teachers unions, or other labor unions. In recent years, many corporations have eliminated pension plans due to their high costs to maintain and their high cost to fund.  In an attempt to replace thsese benefits, many corporations have stepped up their 401k match or increased their profit sharing.

Pensions typically offer employees with two options in which to receive their future cash benefits; employees can cash out of their pension with a one-time lump sum payment or elect to receive monthly pension benefits for the remainder of their lives.  Employees who would like to continue working may elect to postpone the start date of their benefits in order to receive higher monthly payments when they truly have no working income any longer.  Pension plans can be offered as a defined benefit plan or defined contribution plan depending on the companies election.
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