A pension provides regular income payments that you would receive for the rest of your life when you stop working--typically when people retire. A pension plan is a large pool of savings grows over time through contributions from workers or plan participants and their employer or plan sponsor. The plan assets are managed by professional investment managers, and most of the risks (such as investment risk) associated with managing plan assets will be assumed by the plan sponsor rather than plan participants. Particulars will vary from plan-to-plan. For example, there are variables such as how the money or contributions are set aside, who makes contributions, how the income is generated, when payments are made, the types of payments that are made, and how long pension payments last. The basic idea is that the longer you work the higher the payout. There may be tax breaks for pension contributions and there are limits on how much can go into a plan. Many pensions are payable to a surviving spouse on the death of the policyholder, and some pension payments are inflation-adjusted. The term pension is most often associated with defined benefit pension plans that provide regular, annuity-like payments to retirees. This is in contrast to defined contribution plans such as the 401k that shift most responsibilities onto employees and do not provide guaranteed lifetime income.

Report Suggests Longevity Projections are Underestimated

A recent research report from Swiss Re suggests that life expectancy increases over the past several decades have been consistently underestimated. The report, titled “ A window into the future: Understanding and predicting longevity ,” examines the traditional methods of forecasting life expectancy—both of which are largely based on historical trends. For example, the “blending approach” combines historical data with assumptions about the future. A second approach...
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A Visual Representation of Longevity

There is an interesting blog that appears to be affiliated with the British pension consulting firm Redington. The “Red Blog” offers pension-related content from a group of authors who are both formally and informally associated with Redington. Not surprisingly, longevity trends and longevity risk are prominent topics on the Red Blog. The design of the blog and the visual representation of dry and fairly abstract topics are unique. For example, this graphic provides an interesting...
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Why Your Retirement Just Became More Expensive

The extreme gyrations in the stock market over the past week create great headlines and quite a bit of trading activity.  Equally if not more important for retirees, however, is the related action in bond markets.


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Demand for Annuities is Strong Despite Low Consumer Awareness

It is challenging to think of another sector of the U.S. economy that has the same puzzling mix of characteristics as the...

GAO Retirement Income Study Bullish on Annuities

At the request of Wisconsin Senator Herb Kohl, the Government Accountability Office (GAO) just released a study that provides an assessment of the current state of the retirement income market in the United States.

For those interested in retirement income, the study is full of interesting data and conclusions.  Some...