In part two of the Pension Plan insight series, the video compares public pensions to private pensions, focusing on distinctive features such as funding sources, eligibility criteria, legal protections, underfunding risks, and tax implications. It notes that public pensions, available through government bodies, lack the legal protections mandated for private pensions, leading to potential underfunding challenges. The video then explores the shift from traditional pensions to 401(k) plans in the private sector, explaining the defined contribution nature of 401(k)s where employees contribute from their salary to individual investment accounts. Private pensions, in contrast, pool funds in a company’s pension fund without individual ownership. The tax advantages of traditional 401(k) plans, including deferred taxes on contributions and earnings until retirement, are highlighted. The absence of employer matches in pensions, unlike some 401(k) plans, is also noted.
Additionally, the video provides a concise comparison between 401(k) and pension plans, summarizing key points:
401(k):
- Retirement benefit not guaranteed
- Employee contributes part of their salary
- Employee chooses the plan type
- May include an employer match
Pension:
- Retirement benefit is guaranteed
- Employer funds the plan
- Employee has no control over the plan type
- No employer matches in pensions
View part three for further education on Pension Plans. Pathfinder Retirement is dedicated to guiding individuals through the complexities of retirement planning, and is committed to integrity, compassion, and service. To start your journey toward securing your financial future, take the the Pathfinder Retirement questionnaire.