A “pay-as-you-go pension plan” is a pension plan that we pay into, um...as we go.
If that sounds simple, it is. In theory, anyway. It works like a 401(k): we tell our employer how much of our paycheck we want to contribute (or we contribute one lump sum amount every year), and it automatically goes into our pension plan. Then when we retire, boom—we’ve got a pension.
The part where it can get a little complicated is when we have to choose which type of pension plan we want to invest in. But if we work for a private company with a private pension plan, these are choices we’re probably going to have to make. It’s like investing in a mutual fund: do we want to be more aggressive, aiming for higher returns but risking greater losses? Or do we want to play it conservative and stick to a nice, comfortable predicted earnings rate? And what about when we retire: do we want to get everything we’re owed all at once, or do we want it to pay out over time, like an annuity?
Not all pay-as-you-go pension plans have this many options. In fact, sometimes there might be one option: here is the one pension plan, and if we want in, we sign up, and that’s it. But just as with any other investment, we should definitely make sure we know what we’re getting into before we...get into it.
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Finance: What is Pension Benefit Guarant...0 Views
Finance Allah shmoop What is the Pension Benefit Guaranty Corporation
Well the PBGC is a notionally independent agency of the
federal government Its goal is to protect the retirement incomes
of nearly forty million American workers in nearly twenty four
thousand private sector defined benefit engine plans And that mission
statement is right off their website The agency was set
up in nineteen seventy for is part of Arisa Employee
Retirement Income Security Act to protect defined benefit plans That
one were there Benefit is a huge deal because it's
non identical Twin sister is a defined contribution plan The
big diff well in a defined contribution pension plan employees
contribute some percentage of their income to their retirement pension
and the employer matches it and that's it The money
gets invested in the stock market and goes up and
down and up and down but over time mostly up
And then the employees retires Decades later owning whatever the
market or their investments that they risk say they young
period End of story But in a defined benefit plan
the employer essentially guarantees a minimum amount of invested return
That is the big boss Usually the federal government with
its union employees on taxpayer dollars then guarantees a raid
of say nine percent a year to the employee retiring
in the form of a minimum monthly draw from their
pension that the employees can take out If the market
goes through a really bad spell well then it's up
to the company to make up the difference to that
employees The people who framed a Risa knew of the
likely issue that the guaranteed investment return could end up
bankrupting states and or the country So PBGC was formed
and it helps a lot of people like one point
five million who ultimately rely on PBGC to bail out
their pensions And if you're one of those people while
you can expect to get something like sixty five thousand
dollars annually or about fifty three hundred bucks a month
assuming you retire at sixty five So if you retire
early well those cheques arriving in your mailbox won't be
quite so heavy Retire late in while the numbers go
up And maybe the best part is that the U
S taxpayer doesn't need to get all up in arms
Since the dough used to manage PBGC doesn't come from
John Q Taxpayer but rather from the private worlds employers
So in forty or fifty years PBGC may be your
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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