Pension plans are not compulsory in some jurisdictions but you should ensure you have one to secure your future once you are beyond the legal working age. There are tax treatments set by the government to encourage you to plan for your retirement hence there is no reason why you shouldn’t get one.
Why should I have a retirement plan?
There are many reasons why you should have a retirement plan. It is simply for your benefit and the benefit of your family. Perhaps you may have wondered why there are many old people abandoned by their families in the homes of the old, maybe it is because they did not plan for life after retirement. These reasons include:
- To cater for your basic needs
- To maintain your lifestyle after retirement
- To afford medical insurance
- To avoid being a burden to your children
- To avoid the need to work past retirement age
Types of Retirement Plans
There are two types of retirement plans: defined benefit plans (pension) and defined contribution plans.
In a pension plan, your benefits are determined using a particular fixed formula that considers the salary you’ve been earning and the years of service. The payments are made from a trust fund.
The defined contribution plan is more dominant in the private sector. There is a recent trend where many individuals are abandoning the pension plan and opting for this type. This plan is sponsored by the employer and each employee has a personal account.
The total benefits you receive depend on the contributions made into the account; the investment gains from this account minus the expenses and the losses. You then receive the benefits by annuity purchase or any other terms that you agree on.
There are various types of defined contribution plans which are dependent on the types of investment your money is allocated to. The funds accumulated in this arrangement cannot be withdrawn until you reach the retirement age. Any withdrawal will attract a penalty and many people prefer to avoid such circumstances.
There are some retirement benefits that incorporate certain factors of the two types of retirement plans. This is a smarter plan that will benefit the individual more. A cash balance plan is an example.
In conclusion, life can be very unpredictable but certain stages in life are definite; they simply have to happen. Retirement should not catch you by surprise since you knew it would happen right from the day you were employed.
Also remember to alert your family and friends about this because if you don’t, you are the one they will bug for money after retirement. Secure your peace and friendship by bugging them today about retirement plans. The time to obtain a retirement plan is now, get a retirement plan today to secure your future.
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Last update on 2020-03-20 / Affiliate links / Images from Amazon Product Advertising API
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