Are Pension Plans Good Ways to Save for Retirement? Part 2: The Company Perspective
In the first post in this series, Are Pension Plans Good Ways to Save for Retirement, Part 1, we looked at both pension plans and 401k plans and compared both the benefits and dangers of each. This time we’ll look at pension plans from a company perspective.
Let’s say that you own a large company and have a pension plan. Your company has agrees to pay your employees a certain amount per month after they retire until they die based on their years of service and their salary while working for your company. Some plans also require employees contribute a certain amount of their salary to the plan while others do not. Because the amount the employee will receive is specified, a traditional pension plan is known as a defined benefit plan. How would you manage this to make sure you could pay your employees when the time comes?
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