Making a decision about investing in retirement is necessary but challenging in virtually every situation. One key consideration is to determine which is best for you, a pension plan, or 401(k). Take a look at the differences in these two plans and what they mean for you.
A Pension Plan
Pension plans are set up by employers and funded by them throughout the time you work for them. The benefit is that they can provide you with a nice continued source of income after you retire. However, many employees no longer have access to these plans. You may want to consider the following about them:
- You have no say in the management of the funds – this is all done by the employer.
- You have to work for the company for a specific length of time to qualify for the pension.
- Once you reach the requirements, you are guaranteed the same payment after you retire for the rest of your life, no matter how the investments perform.
A 401(k) is one of the most sought after of retirement plans today. These plans are typically set up by an employer, but most of the contributions come from your earnings, though your employer can contribute if desired. You will need to work with the company long enough to have access to the plan. Consider the following about 401(k)s:
- You set up the plan, and you determine how much you want to put into any specific type of investment strategy. You gain more control.
- Many employers match your contributions up to a set amount.
- There is no guarantee of how much you will be paid once you retire as it is dependent on how well the investments perform.
For many people, it’s important to look at the individual investment strategies that may be right for them before deciding to invest in any specific model or strategy.
Finding the Right Support Can Make the Difference
At Sterling Financial, we know every decision is unique. That is why we work closely with our clients to find the best level of support for you. Contact us today to talk about your retirement planning goals.