There are two ways to get a pension. Find an employer who offers one, or figure out a way to create your own. Both are covered below.(Already have a pension, and trying to figure out how to take your benefits? See Pension Distribution Choices.)
What is a Pension
A pension is a source of guaranteed retirement income provided by an employer to employees who have qualified for this benefit.
To be eligible for a pension benefit you must work for the company for the required number of years. Your pension benefit usually increases as you accumulate additional years of employment with that employer.
Pensions are also referred to as “defined benefit retirement plans” as they are designed to define the future retirement benefit that you receive.
How to Get a Pension
To get a pension, you can seek employment with a company or entity that offers pension benefits and work there long enough to become eligible for these benefits. Government jobs, both at the federal and state level, offer pension benefits. Some examples would be military, police and fire departments. Large corporate employers may also offer pension benefits, but it is not as common as it was thirty years ago.
- Only 17 of Fortune 100 Companies Still Offer Defined Benefit Retirement Plans
- Jobs That Still Offer Traditional Pension Plans
- Jobs With Best Retirement Benefits
Ask a prospective employer if they offer a pension and what you need to do to become eligible for it. 401k benefits are not the same as a pension. With a 401k you must contribute your own money to the plan, and the employer will often make a matching contribution, and/or a profit sharing contribution. With a 401k plan you are responsible for the decisions about the money inside the plan. If your employer offers a 401k, but not a pension, one possibility is to use your 401k money to create your own pension benefit when you retire.
Make Your Own Pension
At the point you retire, you can use your own savings, such as money in a 401k plan or IRA, or savings that is not in a retirement plan, and buy an immediate annuity, which would pay you a guaranteed income for the rest of your life. In this way you will have created your own pension.
Delaying the start date of when you begin your Social Security benefits can also be a way for you to create a larger stream of retirement income for yourself. For example, if you retired at 66, you could use savings to buy an annuity that provided guaranteed income for four years, and then at 70 begin your Social Security benefits, which would pay out a much larger amount at 70 than if you began taking them at 66.
Pensions and Your Spouse
Whether you get a pension through an employer, or create your own, if you are married, consider your spouse when you make pension choices. Pensions can be chosen to payout a benefit for your life only, or you can choose a joint/survivor option, which will pay out a monthly amount for as long as either of you should live.