2. How to choose retirement account ?

Pension Plans

Generally thought of as your parents’ or grandparents’ retirement plan, a pension plan was a virtual staple way back when but are harder to find as time goes on. Essentially, you worked for the same company for 30 years and at retirement, you got a gold watch and a pension plan.

All but the largest employers have abandoned these plans largely because they’re a retirement account that’s fully funded by the employer. The only benefit to the employer who participates in a pension plan now is if you’re the owner of the business and open a pension plan for yourself as an individual.


  • Defined Plans with Specific Benefits – The core strength of pension plans is that they are defined benefit plans, rather than defined contribution plans, which is what most other tax-sheltered retirement plans are. Your benefits from the plan are pre-determined, based on a combination of your income and the number of years you are employed by your company.
  • Employer-Maintained Account – You don’t need to make contributions, your employer handles all of this. Your employer also manages the account for you, so you will have virtually zero responsibility.


  • Zero Control – The lack of responsibility for your pension plan also means you have zero control over it.
  • Required Participation for Years – Pension plans typically have vesting requirements, which means you will have to participate in the plan for a minimum number of years (generally five years) before the money will become yours. The number of years you’re with an employer is a major factor in determining your benefit, so you’ll need to be in a plan for 20 years or more in order to get a decent pension plan.

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