Corporate Pension Plan

  

Back in the days of Mad Men, everyone was talking about retirement. What a wonderful day when you could walk away from that corporate job and start living on your pension plan.

Pension plans have largely declined as a mode of compensation. But those lucky enough to obtain a corporate pension plan did so while working at a company for a long time.

The process works like this: The company agrees to incrementally compensate employees ("benefits, baby") by putting money into a retirement account known as a pension. Both companies and employees typically contribute to the pension. It gets invested in the stock market in one form or another, and compounds away with the market. These pensions are usually funded based on the employee’s length of tenure, the employee’s job, and the type of work performed. Like...the more senior you are, the more dough you make, so that 3% a year contribution or whatever the number is...grows.

Watch our videos on this one as it's a controversial topic, with many corporations under-funding pensions, and most governments massively doing the same. Bottom line: If you're counting on your government pension being there when you retire...um, well...Google "Uber driver."

Related or Semi-related Video

Finance: What is a Pension?31 Views

00:00

finance a la shmoop. what is a pension? well it rhymes with tension, and likely

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for good reason. if you're a teachers pension or a fireman's pension or [person wearing dark glasses writes something down]

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another state employees pension that's backed up by a state that's going

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bankrupt. Hi, California, Hi Illinois. well we're looking at you. all right people

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well a pension is another term for a retirement fund. but what's special about

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a pension is that the employer essentially forces you to put away money

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for your retirement and then they invested for you.

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how nice. or at least be sure you invest it well on a salary of 75 grand a state [gambling table shown]

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employed ditch-digger might get a contribution of say 10 grand a year into

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her pension, and that's each year 10 grand of forced savings for as long as

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she you know digs ditches for the state. and in some states where the unions are

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strong in the governing financial knowledge is weak the government

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guarantees a minimum financial return on the pension investment made on behalf of

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the employees. that is in California for example the state guarantees a 10% per

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year return on their invested pension savings. if the invested return like [equation]

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investing it in Wall Street and stocks and bonds and private equity funds and

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all that stuff well if that invested return is less than that number less

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than that 10%, then the state rights to the pinch and a check to cover the

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incremental difference. yeah it's a huge Delta and it's well pretty much why you

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a Californian Illinois you're going bankrupt remember. Jesus Saves

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but Moses invests. [ Moses, holding stone tablets glares and demands interest]

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