Used to be, pension plans were the ticket to a less-stressful retirement. You work for a company for years and in return the company continues to provide a regular check for your golden years. Not so much anymore.
According to the Employee Research Institute, over the last three decades the share of private-sector workers in pension plans dropped from 28 percent to only 3 percent in 2008. During the same period, the share or workers enrolling in 401 (k)-type plans was up to 31 percent from 7 percent. Twelve percent were able to take advantage of both plans in 2008.
With a pension plan, known as defined benefit plan, the company promises you a certain income for the rest of your life based on the number of years you put in. With a 401(k) plan, known as a defined contribution plan, both you and your employer contribute to a tax-deferred savings account designed to supplement Social Security and a pension, if you have one.
As the AJC reports today, SunTrust Banks will freeze its employee pension plan at year’s end, following the examples of other companies trying to cut their costs. The freeze doesn’t mean SunTrust is getting rid of its pension plan, but the company no longer will take into account compensation earned after the end of the year in determining future checks.
How are you set for retirement? Will you be able to rely on a pension, 401(k) and/or Social Security without taking on another job? Are you looking at a life of toil?