A pension is a retirement plan that can provide regular income after you stop working.
Traditional pensions, also called defined benefit plans, generally calculate retirement income using factors such as salary history, years of service and plan formulas.
Depending on the plan, payments may continue for life and may include survivor benefit options for a spouse or beneficiary.
Why Consider Pension Income?
Predictable Payments
Pensions can provide regular retirement income that may continue for life.
Employer-Sponsored Benefits
Many pension plans are funded partly or fully by an employer.
Retirement Stability
Pension income can help create a steady foundation alongside Social Security, savings and investments.
Explore Pension Options
Defined Benefit
Provides retirement income based on a formula using salary, service and plan rules.
Disclaimer: Pension benefits vary by employer, plan rules, retirement age, service history and payout option. Figures shown are placeholders for future plan examples.
What Can Affect Pension Income?
Years of Service
Longer service generally results in a larger pension benefit under many plans.
Salary History
Many plans use some measure of earnings when calculating retirement income.
Retirement Age
Claiming benefits earlier may reduce monthly income, while delaying may increase it.
Benefit Formula
Each pension plan uses its own method to calculate retirement benefits.
Survivor Option
Choosing survivor protection can reduce the retiree’s monthly benefit.
COLA Provisions
Some pensions include cost-of-living adjustments, while others do not.
Who May Consider Pension Income Planning?
Pension planning may be important if you expect to receive retirement benefits from a current or former employer.
Common Reasons
Understanding future monthly income
Choosing a retirement date
Comparing lump sum vs. monthly payments
Protecting a spouse
Coordinating pension and Social Security
Planning taxes in retirement
Building a complete retirement income strategy
Benefits and Things to Consider
Benefits
Predictable retirement income
Lifetime payment options
Employer-funded benefits may apply
Survivor protection may be available
Can provide retirement stability
Things to Consider
Benefit formulas vary
Early retirement may reduce income
Lump-sum decisions can be permanent
Inflation protection may be limited
Survivor options can reduce monthly payments
Pensions vs. Other Retirement Income
Pensions
Provide employer-sponsored retirement income based on plan rules and service history.
