Investments Personal Finance Retirement

Q&A: What is a pension?

A pension is a retirement plan that requires an employer to make contributions to a pool of funds set aside for a worker’s future benefit. The pool of funds is invested on the employee’s behalf, and the earnings on the investments generate income (usually monthly) to the worker upon retirement.

Real-life Application: Person A worked for XYZ Company for 30 years, which allowed them to retire with a pension of $3,000 per month, one of the benefits XYZ Company wanted to have for their employees.

Pro Tip: There are various pension options that a worker can choose from based on their goals, their health (and their spouse’s), and their other income.

Also, pensions have been phasing out of existence due to the administrative upkeep and liability on the companies providing them.

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