How does a defined benefit plan work?
A defined benefit plan is also known as a pension plan. The calculation of a pension plan is made according to the amount of time you work in that certain sector, and the average income received throughout those years. The payment of pension money occurs upon retirement, and each company does it differently. Pensions are really hard to find nowadays, the status of benefit plans has a lot to do with the health of the company. It depends if the company is fully funding its pension plans. There is a pension outfall in the United States because companies weren’t able to completely fund their pension plans. The only downside to pensions is the fact that the money is not really yours until the time you retire and receive it. Until then, anything can happen. For those who do have a pension plan, it is a great base for social security upon retirement.
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Casey Smith
President, Wiser Wealth Management
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