Which Retirement Plan Comes With a Guaranteed Benefit at Retirement?

Which retirement plan comes with a guaranteed benefit at the very end of it?

I’m going to tell you.

And I’m going to break it down as simply as possible.

There are really two primary types of retirement plans.

Key Takeaways

• There are two main types of retirement plans: defined contribution and defined benefit
• Defined benefit plans (pensions) provide guaranteed lifetime income
• Most people today have defined contribution plans, not pensions
• Only about 9% of workers still have a pension
• If you don’t have a pension, you have to create your own
• Annuities can be used to turn savings into guaranteed lifetime income

The Two Types of Retirement Plans

Let’s start here.

There are two types:

1. Defined Contribution Plans

This is what most of you have.

Examples:

• 401(k)
• 403(b)
• 457
• SIMPLE IRA
• SEP IRA

You are contributing money.

Your employer may match.

You’re accumulating assets over time.

That’s it.

2. Defined Benefit Plans

This is the one you’re asking about.

A defined benefit plan is a pension.

It provides a guaranteed income at retirement.

Every month.

For life.

Just like Social Security.

The Reality: Most People Don’t Have a Pension

Here’s the problem.

Defined benefit plans are basically a dinosaur.

Only about 9% of people working today have a pension waiting for them.

The other 91%?

You’re on your own.

You have a defined contribution plan and a pile of money.

And when you retire, the company says:

“Good luck.”

Why Companies Got Rid of Pensions

Years ago, pensions were common.

You worked for a company your entire career.

You got a gold watch.

You got a pension.

That’s gone.

Why?

Because pensions put the company on the hook.

They have to pay you for life.

Defined contribution plans shifted that responsibility to you.

So What Do You Do Without a Pension?

This is the key.

If you don’t have a defined benefit plan, you have to create your own.

You take your:

• 401(k)
• IRA
• Savings

And you turn it into a lifetime income stream.

That becomes your personal pension.

Why This Matters More Than Ever

Social Security was never designed to be your primary income source.

It was designed to be a supplement.

But for a lot of people, it’s becoming the main source.

That’s a problem.

Because most people don’t have anything else backing it up.

The Bigger Picture

We’re in a situation where:

• Fewer people have pensions
• More people are retiring
• Life expectancy is increasing

That creates a gap.

And that gap has to be solved individually.

Focus on Your Income Floor

The starting point is your income floor.

Add up what’s coming in:

• Social Security
• Any pension income
• Required Minimum Distributions
• Other consistent income

Then ask:

Is that enough to live the life I want?

If not, you need to create additional guaranteed income.

Where Annuities Fit

This is where annuities come in.

They allow you to:

• Turn savings into income
• Create a pension-style payment
• Guarantee income for life

You are essentially doing what companies used to do for you.

What You Should Do Next

Once you know your income floor and understand whether you have a gap, the next step is:

Figuring out what it would take to create your own guaranteed income stream.

That’s something you can model and compare across all carriers using our annuity calculators here: https://www.stantheannuityman.com/ annuity-calculator/

The Bottom Line

The only retirement plan that comes with a guaranteed benefit is a defined benefit plan, also known as a pension.

The problem is most people don’t have one.

So the responsibility shifts to you.

You have to take your defined contribution plan and turn it into income.

If you do that correctly, you can create your own pension and remove the risk of outliving your money.