Pension Plan Participant Services 

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Pension Plan Participant Services

While pension plans are no longer as common as they once were, most government jobs offer pensions, and many older adults may have pension plans that were started early in their careers. Pension plans are a fantastic asset during retirement, though understanding how pension plans work and fit into your overall retirement goals can be confusing. To learn more about pension plan participant services and how our professionals at Top Investment Solutions can help you to understand the ins and outs of your pension plan, reach out to our team today. 

What Are Pension Plans?

A pension plan is a very unique type of retirement savings and planning account. In a pension plan, employees and employers both make contributions to the plan. This money is pooled and could be invested; the pooled money is set aside in order to make payments to eligible employees in the future. There are two main types of pension plans: defined benefit plans and defined contribution plans. 

  • Defined benefit plan. In a defined benefit plan, the employee is guaranteed a set monthly payment for life or a lump-sum payment upon retirement. This is very different from a 401(k) or other retirement savings plan in which returns are not guaranteed. 
  • Defined contribution plan. In a defined contribution plan, on the other hand, the pooled money is invested and, over the course of the employee’s working years, grows. At the time of retirement, the employee is entitled to the balance of the plan. This type of plan is riskier, but also has the potential for higher returns. 

Understanding Pension Plan Vesting

One thing that’s very important to know about pension plans is how pension plans vest, which is something unique in comparison to other retirement savings plan types. In a pension plan, the contributions made by the employee and the employer are not immediately available to the employee, and will not become available until the employee is fully vested. This means that if you make contributions through a defined benefit plan and then quit your job, you could lose the amount of money that you’ve put in. Sometimes, vesting (the point at which the employee is eligible to receive funds) happens immediately; other times, funds won’t fully vest until a year or more of the employee working. 

How Pension Plans Fit Into Your Retirement Plan

A pension plan guarantees you retirement income—something that can be essential and comforting at the time that you stop working. However, it’s important to understand that the amount that you receive in pension benefits may not be enough to fully support yourself during your non-working years. In many cases, drawing from another source of funds, such as a 401(k) or Social Security retirement benefits (or both), is necessary. 

Pension Plan Participant Services Provided By Top Investment Solutions

At Top Investment Solutions, we can answer your questions about pension plans and guide you through what you need to know about planning for your future. To learn more about our pension plan participant services and other retirement planning services we offer, reach out to us online or by phone to get started. 

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