What is a Pension?

Answer:
A pension is a regular payment to individuals

that provides a steady income most usually after retirement. After retiring, a person covered under a pension receives income for the remainder of his or her life.

While there are other forms of pensions, retirement pensions are the most common. Pension plans are usually set up by the employer to provide retirees with income in retirement.

Most have specific terms that you must meet in order to qualify such as having worked for the company for a certain number of years. For example, you may need to work at the same company for ten years before being fully vested in the pension plan. If you leave the company before that time, you could lose the pension.

If you are fully vested in the pension plan and later leave the company, you can usually receive the pension benefits when you do retire.

Public employees that receive a pension may not be eligible to collect Social Security.

There are two main types of pension plans: defined benefit and defined contribution plans. A defined benefit plan states exactly how much the retiree will get upon retirement while the defined contribution plan does not specify an amount.