Corporate Pension Plan

  

Back in the days of Mad Men, everyone was talking about retirement. What a wonderful day when you could walk away from that corporate job and start living on your pension plan.

Pension plans have largely declined as a mode of compensation. But those lucky enough to obtain a corporate pension plan did so while working at a company for a long time.

The process works like this: The company agrees to incrementally compensate employees ("benefits, baby") by putting money into a retirement account known as a pension. Both companies and employees typically contribute to the pension. It gets invested in the stock market in one form or another, and compounds away with the market. These pensions are usually funded based on the employee’s length of tenure, the employee’s job, and the type of work performed. Like...the more senior you are, the more dough you make, so that 3% a year contribution or whatever the number is...grows.

Watch our videos on this one as it's a controversial topic, with many corporations under-funding pensions, and most governments massively doing the same. Bottom line: If you're counting on your government pension being there when you retire...um, well...Google "Uber driver."

Related or Semi-related Video

Finance: What is Pension Benefit Guarant...0 Views

00:00

Finance Allah shmoop What is the Pension Benefit Guaranty Corporation

00:08

Well the PBGC is a notionally independent agency of the

00:12

federal government Its goal is to protect the retirement incomes

00:16

of nearly forty million American workers in nearly twenty four

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thousand private sector defined benefit engine plans And that mission

00:25

statement is right off their website The agency was set

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up in nineteen seventy for is part of Arisa Employee

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Retirement Income Security Act to protect defined benefit plans That

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one were there Benefit is a huge deal because it's

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non identical Twin sister is a defined contribution plan The

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big diff well in a defined contribution pension plan employees

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contribute some percentage of their income to their retirement pension

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and the employer matches it and that's it The money

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gets invested in the stock market and goes up and

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down and up and down but over time mostly up

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And then the employees retires Decades later owning whatever the

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market or their investments that they risk say they young

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period End of story But in a defined benefit plan

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the employer essentially guarantees a minimum amount of invested return

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That is the big boss Usually the federal government with

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its union employees on taxpayer dollars then guarantees a raid

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of say nine percent a year to the employee retiring

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in the form of a minimum monthly draw from their

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pension that the employees can take out If the market

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goes through a really bad spell well then it's up

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to the company to make up the difference to that

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employees The people who framed a Risa knew of the

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likely issue that the guaranteed investment return could end up

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bankrupting states and or the country So PBGC was formed

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and it helps a lot of people like one point

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five million who ultimately rely on PBGC to bail out

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their pensions And if you're one of those people while

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you can expect to get something like sixty five thousand

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dollars annually or about fifty three hundred bucks a month

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assuming you retire at sixty five So if you retire

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early well those cheques arriving in your mailbox won't be

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quite so heavy Retire late in while the numbers go

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up And maybe the best part is that the U

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S taxpayer doesn't need to get all up in arms

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Since the dough used to manage PBGC doesn't come from

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John Q Taxpayer but rather from the private worlds employers

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So in forty or fifty years PBGC may be your

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best friend but until then well you're invisible Rabbit pal 00:02:30.543 --> [endTime] will be with you through thick and thin

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