The various kinds of retirement plans

In the 21st century, a lot of us choose employment in order to meet our basic needs. With years of employment, we become experienced in the job we are doing. At some point, retirement will be necessary. For us to be able to retire, we have to prepare a method of earning substantial income.

There are a number of ways to do this. Some save their whole life so that they can live off their savings when they are no longer working. Other people have plans in place that pay them a certain sum of

money periodically when they are no longer in employment. Such plans are for things called ÒpensionsÓ.

A description of various pension plans that exist

The first plan is the ÒDesigned Benefit Pension PlanÓ. ÒThese plans are constructed in such a way that they provide a fixed amount of benefit after you retire. These are usually based on a formula that is used to calculate your pension benefits.

The formula used are the flat benefit formula, the best earning average and the career average earning formula.

Another pension scheme type is the ÒDefined contribution pension planÓ that pays a standard amount from the personÕs salary into an investment account periodically. The sum of the amount in the account differs according to third party sources that add to it and the interest you receive on that amount.

The two schemes described above are the only 2 that are registered. There are a few others, such as deferred profit sharing, employee stock purchase plans, and individual pension plans. Most of these plans depend on the performance of the company for your pension.