Yep. A pension plan is an annuity payment that guarantees a lifetime income stream. Now, it depends on your employer and how they've set things up.
The key with the pension plan is you have to look at the claims-paying ability of your employer. In other words, your employer is going to be on the hook to pay you or your spouse/partner for the rest of your life however you’ve defined your benefit plan. So you have to make sure that they have enough financial stability to do that.
If they do not have enough financial stability to do that, you might want to look into taking the lump sum if they offer a lump sum, and then transferring that out to the highest paying single premium immediate annuity, the very highly rated carrier. But in most cases, pension plans are a very, very good deal if you are so fortunate to have one. But by the way, at the time of this taping, less than 10% of private companies offer pension plans. But if you're a government worker or a member of a union, etc., state worker for that government, then you've got a pension plan in place and you're fortunate and take advantage of it.
Let's look at it from the payment standpoint. When pensions are offered by a company as a type of retirement plan, typically that pension payment is for the life. It's as long as you live, regardless of how long you live, they're on the hook to pay. If you set it up joint life with your spouse or partner, same thing is if you die, then it's going to continue uninterrupted and unchanged for that person's life.
It depends on the plan that you're with and the offerings that they give. Now, if you are a person that has been given this pension offer from your company, and you want to make sure that you're doing the best thing for your family, making the best decision going with the highest contractual guarantee. Please let us look at that for you and we'll do a comparison apples to apples quote with what you're being shown by your company or your employer, and make sure that you're receiving the highest contractual guarantee available.
Then you got to ask yourself why that is. I think logically the company that's offering that pension, wants to hold onto the money. Why? They don't want to come up with the lump sum to pay you, so they're going to make it attractive for you to stay by offering the highest contractual guarantee possible. So they go out and shop and make sure that their offer is typically higher than what I can get for you, which is fine, but you use us to shop to make sure that you're getting the highest contractual guarantee.
So in most cases, in most cases, pension plans pay for life and that is regardless of how long you live.
The answer is no. 401Ks are what's called a defined contribution plan for retirement savings, and a defined contribution plan pretty much took the place of pension plans a while back, say 20 years ago. There's not many pension plans being offered by companies anymore. 401Ks involve mutual funds and ETFs and investment choices that hopefully grow your money, but it has nothing to do with pensions. 401Ks are for the growth of your money. Typically when people have 401Ks at the time they retire, then they have to convert that 401K asset into a lifetime income stream. This means they have to transfer it to an annuity of some type to create a lifetime income. Social Security is a pension plan offered by the United States government. It's the best inflation annuity on the planet.
If you don't work for the government or have a very strong labor union, then you probably do not have a pension with your private employer. 80% of employees work for small businesses in the private sector, and most small business owners do not offer a pension plan.
I don't know that until you die. There's no ROI until you die, because it is all about your life expectancy, and your employer that's offering the pension, well they're on the hook to pay regardless of how long you live. Blunt, but true. So if you’re one of the lucky ones with a pension, rock on with your bad self.