The availability of a defined benefit retirement plan, traditionally known as a pension, is a significant consideration for employees evaluating compensation packages. This type of plan guarantees a specific payment amount during retirement, typically based on factors such as salary and years of service. Such plans provide a predictable income stream, offering financial security in later life. For instance, an employee with 30 years of service might receive a pension that covers a substantial portion of their pre-retirement income.
These retirement vehicles offer considerable advantages by shifting the investment risk from the employee to the employer. They were once commonplace but have become less prevalent in recent decades due to increasing costs and regulatory complexities. The stability and guaranteed income they provide are especially valuable in an era of volatile markets and concerns about the adequacy of individual retirement savings. Their historical role in securing retirement for millions underscores their continued relevance in discussions about retirement planning.
