Pension

A pension (a defined benefit plan) is a retirement benefit where your employer promises a set monthly income in retirement, typically calculated from your salary history and years of service. Unlike a 401(k), the investment risk falls on the employer, and the income is usually guaranteed for life.

Pensions have become rarer in the private sector but remain common in government and some union jobs. They function much like an annuity or Social Security — guaranteed lifetime income that covers part of your spending and reduces how much your portfolio must carry. Key decisions include when to start, whether to take a lump sum versus the annuity, and which survivor option to elect for a spouse.