Pensions were common when it was typical to work for a company for 20 or 30 years and then retire with a gold watch and a full package of retirement benefits.
When speaking about retirement savings, there was the “three-legged stool” of retirement income: personal savings, Social Security benefits and a pension. In this retirement-saving strategy, pension and Social Security benefits provided a guaranteed monthly income for the rest of the retiree’s life.
Times have changed quite a bit over the last couple of decades. Driven mostly by employers’ desire to reduce their long-term liability exposure, pension plans have become increasingly rare.
They have been replaced mostly by 401(k) plans or other employer-sponsored savings plans. But some people are lucky enough to still have a pension, and it will be a big part of their retirement plan. If you are one of the fortunate ones, you will have some decisions to make when you are ready to retire.