Essay about Benefits And Benefits Of Pensions

770 Words Nov 23rd, 2014 4 Pages
Pensions are retirement account that an employer uses to obtain an income when they retire. Pensions are one of the best ways to save up for retirement; they also come with many tax benefits. Workers pay a percentage of their salary towards the pension each paycheck. The payout one receives depends on how long one worked for the company and the salary. Employees should understand the options of pensions. They have the choice to get payments, which are series of regular payments, lump sum, or combination of the two. The employer hires a firm that the employees can invest to receive pensions after retirement. Pensions are very simple and easy, all one has to do is show up for work. One would automatically be enrolled in the plan. There are some companies, which would want one to be working with them for a year before being enrolled. Just because one is enrolled does not mean the pension is 100% until one has worked there for few years, or fully vested. This brings in the question, what if one leaves the job? There are two type of vesting. One is called cliff vesting; this means that if one quits the job in five years or less which means you lose all the pension benefits; on the other hand, if you leave after five years one gets all the pension benefits they were promised. The second type is called graded vesting; one can get up to 20% of the benefit if one happens to leave in three years. Basically, it increases 10% each year one stays before the fifth year is complete.…

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