FAQs about Retirement Benefits

A retirement benefit plan is one of the oldest insurance benefits. It is a form of social insurance that pays out in installments after a person retires. This allows them to have a steady flow of income as they enjoy the days after a fulfilling career. These payments are usually based on the age of the person after retirement and the amount of time they put in as an employee. These payments are usually sent to the recent employee once a month.

Types of Basic Retirement Plans

• Defined Benefit Plan- a traditional workplace pension that is usually paid in the form of annuity. The amount paid out is based on the salary and length of service by the employee. This plan is usually not transferrable from workplace to workplace.
• Defined Contribution Plan- this plan doesn’t guarantee any benefits. It is solely up to the employee and/or the employer to decipher how much money is saved throughout the time of the employee’s stay with the company. Although this plan gives the employee more control of their funds, it is much riskier than other retirement benefit options.
• Cash Balance Plans- An amount of money defined by the employee or employer is defined annually based on compensation and a guarantee that the amount will increase by a fixed annual percentage. After retirement, this amount can be taken out in a lump sum or an annuity.
• Individual Retirement Accounts (IRAs) – a person is able to set aside and invest a contribution to an account each year. IRAs can be rolled over from other retirement plans even when the individual changes jobs.
• Keogh Plans- a tax deferred retirement account for self-employed persons.