An individual will have a significant reduction in his income by the time he has retired from work

An individual will have a significant reduction in his income by the time he has retired from work

For someone who has been in service within a particular company, a pension is something that he would usually be expecting by the time of his retirement.  Depending on the industry he/she is currently working, the amount of pension and the benefits he/she will receive will vary.  While some individuals manage to get a pension from the company they have been working before, there are those who are able to come up with a pension of their own.  No matter what type of pension it is, there is only one thing for certain – getting a pension plan is absolutely important.

Why is a pension plan important?

When a person is nearing his retirement, or has already retired from his work, a pension usually follows. The pension, which comes in the form of cash, is given to the retiree as a means of gratitude for them for rendering their service in a company for a long period.  Moreover, it is important to have a pension mainly because of the following things:

  1. An individual will have a significant reduction in his income by the time he has retired from work.  It is the amount received from the pension compensating such loss of income due to retirement.
  2. Pensions make it possible to provide support in the form of cash to those family members who have been left if ever the owner dies.

This just goes to show that having your own pension by the time you retire is quite important in order to support you and your family even if you are not making that much income.  This is particularly important if are currently married since the pension plan you have will be the one to financially support your bereaved partner if ever you die.

Start your planning early.  The sooner you understand your pension, your needs, and your other income, the sooner you will be independent.

Start your planning early. The sooner you understand your pension, your needs, and your other income, the sooner you will be independent.

Other than these, there are also other importance of having a pension plan.  First, a pension plan is important in the sense that it is one of the world’s largest sources of capital.  Second, it is important because it provides a greater income security to the retirees.

When you should start preparing for your pension?

The earlier you prepare for your pension, the better it would be.  This is because the amount you invested for your pension plan will be the basis of the pension amount you will receive.  Other than that, you can also expect other long term benefits once you have planned for your pension in advance.

Readers, do you look for jobs in companies that provide pensions, or do you take a job where ever you can find it?  Do you look at total compensation over your entire career when you’re comparing employment opportunities?

2 Responses to The Importance of Getting a Pension Plan

  1. I have never actually looked for a job that had a pension plan. I know the value of them and wish some of the companies I worked for had them. To my understand less and less companies are offering pension plans. I look at total compensation when I was in the workforce. I have a couple of friends that are police officers and firefighters and they have a great setup for retirement.

    • pradmin says:

      Yup, total compensation is the way to look at things, pay, benefits, retirement plans (pensions if available) time-off, etc. all go into the calculations. The unique thing about many pensions, is that the value of their benefits increase over time as well. Looking at total compensation one year is great, but if you need 10 years to vest, and start looking out past that, even that 1% of salary is keeping pace with inflation, and it’s usually your highest 5 years or something to that effect. So the compensation you earned earlier for retirement can get bumped up if you get raises and promotions.