Pension

Retirement

A pension (defined benefit plan) is an employer-funded retirement benefit promising a specific monthly payment for life based on salary and years of service. Common pension formula: 1.5% × years of service × final salary average. A 30-year employee with $80,000 final salary might receive $36,000/year. Pensions have largely been replaced by 401(k)s (defined contribution) in the private sector but remain common for government workers, teachers, and union members. Pension Benefit Guaranty Corporation (PBGC) insures private pensions up to limits; government pensions aren't federally insured. Lump-sum buyout offers should be evaluated by comparing to expected lifetime payouts.