Can You Have Both a Pension and a 401k?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Yes, You Can Have Both a Pension and a 401k

It is entirely possible and quite common to have both a pension plan and a 401(k) plan simultaneously. This scenario usually involves having a personal pension plan, such as a deferred annuity, along with an employer-sponsored pension plan or a 401(k).

Understanding Pension Plans and 401(k)s

  1. Pension Plan: A pension plan is a retirement plan funded by the employer, offering a fixed payout at retirement, usually based on salary and years of service.
  2. 401(k) Plan: A 401(k) is a tax-advantaged retirement savings plan sponsored by an employer. It lets workers save and invest a portion of their paycheck before taxes are taken out.

Combining Pension and 401(k) Plans

  • Dual Benefits: Having both plans allows you to benefit from the stability of a pension and the flexibility and potential growth of a 401(k).
  • Personal Pensions: Personal pension plans like deferred annuities can complement employer-sponsored plans by providing additional retirement income.
  • Contribution Limits: The contribution limits for 401(k) plans do not affect your eligibility to contribute to a personal pension plan.
  • Tax Implications: Contributions to both plans can offer tax advantages, though they differ in their structure and tax treatment.

Examples of Combining Plans

  1. An employee at a company offers both a pension plan and a 401(k). The employee contributes to the 401(k) while the employer contributes to the pension.
  2. A self-employed individual sets up a personal pension plan and a solo 401(k) to maximize retirement savings.

Conclusion

Having both a pension and a 401(k) can be a strategic approach to building a robust retirement fund, leveraging the benefits of both plans. By understanding and utilizing these options, you can create a more secure financial future for your retirement. Contact us today for a free quote.

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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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