Forget the Pension, Retirement Is Up to You

Are you a young adult just getting started in the working world? Most millennials have heard the term "pension plan," but don't truly grasp what the phrase means. After all, the corporate pension plan is nearly extinct. Thankfully, today's retirement plans are more diverse, rewarding and agile than ever before, making it an exciting time to buy your own future lifestyle. And it's a good thing too, because while many businesses offer matching up to a percentage, that benefit is also rapidly declining.

A What Plan?

What exactly is a "pension plan?" Investopedia defines it as "a retirement plan that requires an employer to make contributions into 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 to the worker upon retiring." It is sometimes also referred to as a defined benefit plan.

Throughout the boomer generation, an employee could count on a secure pension plan provided by their employer. The benefit often allowed companies to hire and retain the best workers available. The employer would fully manage the benefit, with little employee choice or involvement in the process. Most often, the payout was based on how long the employee worked at the company and what their salary was. Also, the longer the period of employment, the bigger the pension payout. Over the years, though, the responsibility for a savings fund has moved from the employer to the employee.

What's Retirement Got to Do With it?

In today's working world it is still possible to receive a pension. Some public-sector entities such as government and education continue to provide pension plan options to their workers. Most private sector employees will likely be part of an employee directed fund such as a 401(k), or, if the company is a non-profit institution, a similar 403(b) fund.

So how likely is today's newly employed worker to receive a pension plan? A recent study from the Employee Benefits Research Institute showed that by 2011, only 24 percent of American workers were participating in a combined pension/retirement plan, while an even smaller 7 percent of employees participating in a retirement plan were in a pension plan only.

Facing the fact that the pension plan is nearly extinct, what are your options for a healthy post-retiring lifestyle? The Internal Revenue Service (IRS) has a comprehensive list of retirement options that could work for you.

The average retirement age is on the rise, according to the University of Michigan, and it's wise to be ahead of the curve. Consider the "pay yourself first" rule. Before any bills are paid for the month, set aside a portion of your earnings into an interest-bearing savings account or tax deferred account. Setting aside these funds will give you peace of mind.

At Coosa Valley Credit Union, we help you achieve a highly successful future. See which CVCU retirement account could start you on the right trajectory.

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