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Pension plans require your employer to contribute money to your plan as you work. Once you retire, you earn the accrued pension money divided into monthly checks. In most cases, a formula determines the amount you receive. Some of the formula variables include your age, compensation and years of service to the company.
Your employer?or employers?makes regular contributions on your behalf, using a formula based on your years of service, hours worked, pay, or other factors negotiated by your collective bargaining unit. The money is invested and managed for you, and it grows tax deferred over the course of your career.
Pension administration in the United States is the act of performing various types of yearly service on an organizational retirement plan, such as a 401(k), profit sharing plan, defined benefit plan, or cash balance plan.
Pensions offer greater stability than 401(k) plans. With your pension, you are guaranteed a fixed monthly payment every month when you retire.
Service Retirement In most cases, the employee can retire as early as age 50 with five years of service credit. If the employee became a member on or after January 1, 2013, they must be at least 52 years old to retire.
Your traditional pension plan is designed to provide you with a steady stream of income once you retire. That's why your pension benefits are normally paid in the form of lifetime monthly payments. Increasingly, employers are making available to their employees a one-time payment for all or a portion of their pension.