Are Pensions Rare Now?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Overview of Pension Rarity

Pensions, once a mainstay of retirement planning, are indeed becoming rarer. The shift has been towards defined contribution plans, like 401(k)s, where the risk and responsibility of saving for retirement fall more on the individual rather than the employer.

The Decline of Pensions

  • Shift to Defined Contribution Plans: Companies have increasingly moved away from defined benefit plans (like pensions) to defined contribution plans to reduce their long-term financial commitments.
  • Economic Factors: The rise in life expectancy and the increasing costs associated with managing pension funds have also contributed to their decline.

Alternative Retirement Savings Options

  1. 401(k) Plans: Employer-sponsored plans allow employees to save and invest a portion of their paycheck before taxes.
  2. Individual Retirement Accounts (IRAs): Tax-advantaged accounts where individuals can save for retirement.
  3. Investment Portfolios: Diversified portfolios can be created with stocks, bonds, and other assets to grow retirement savings.

Deferred Annuity with Guaranteed Lifetime Withdrawal Benefit

  • What It Is: A deferred annuity with a guaranteed lifetime withdrawal benefit (GLWB) is an insurance product that you invest in for a period before starting to receive payments.
  • How It Compares to Pensions: Like a traditional pension, it provides a steady income stream for life. However, it’s different because it’s typically funded by the individual, not the employer.
  • Advantages: The main advantage is the guaranteed income, which can mimic a pension’s steady cash flow.
  • Disadvantages: These annuities often come with higher fees and can be complex to understand.

Conclusion

Pensions are indeed becoming rare, and the deferred annuity with GLWB is one of the closest alternatives available. However, it’s important to consider other retirement savings options and understand the differences and risks associated with each. These changes in retirement planning require individuals to be more proactive in managing their retirement savings.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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