A pension is a fixed sum of money paid regularly to a retiree. A pension plan is funded by the employee, employer or both. For plans that require employee contributions, money is invested and then used to purchase an annuity, which provides a set income.Continue Reading
The number of companies offering a pension plan to new employees declined from 60 percent of Fortune 500 companies in 1998 to just 24 percent by the end of 2013. As of 2013, only 7 percent of Fortune 500 companies offered traditional pension plans.
Traditional pension plans typically use a formula to determine the amount of money the retiree receives. This formula is a percentage multiplied by the number of years of service and factoring in the employee's ending salary. The formula varies, but as of 2014, Exxon Mobile offers 1.6 percent times the pension service years times the average last pensionable pay less Social Security deductions. Lockheed Martin, United Parcel Service, Johnson and Johnson, 3M, Bank of America, Wachovia, Coca Cola, Accenture, and Liden Nestle Soled & Associates are companies that still offer a defined benefit, or pension plan, as of 2013. In Nestle's plan, if the employer contributes $200 per month for 30 years, the employee receives $6,000 per month for the rest of his life.Learn more about Financial Planning
Pensions solely provided by a retiree's former employer count as taxable income, according to TaxHelp.org. However, if a retiree paid for part of the pension during his working years, he can exclude that part of each pension payment from his taxes due to recovery of cost.Full Answer >
Military retiree pay is calculated based on either the Final Pay, High 36 or Career Status Bonus plan, notes Military.com. Period of tenure in the military and years of active service dictate what plan applies to each specific retiree.Full Answer >
Defense Force Accounting Services retirement pay is calculated by multiplying the retiree's base pay by the service multiplier. The service multiplier is calculated by multiplying the time the retiree served by 2.5 percent, according to DFAS.milFull Answer >
To access retirement services online, a retiree can visit the website for the U.S. Office of Personnel Management. This website offers online services, a benefits estimator and a summary of retirement service budgets.Full Answer >