Retirement Income Retirement Income

Retirement Income Earned Now

Retirement is that goal in life that many hard working individuals aspire to. This retirement dream is especially sweet when the boss is demanding or stress on the job is the overwhelming.

However, in order to fully appreciate and prepare for a sound retirement, individuals need to ensure that the accumulation of retirement income is part of one's current plan.

To accomplish this goal there are certain financial vehicles that should be taken advantage of during the pre-retirement years. Two of those particular retirement income venues include a 401 K opportunity and pension plan.

401k

One of the best ways to achieve a retirement nest egg is to take advantage of the company s 401 K plan. Generally, a 401 K plan is that savings opportunity in which the employee donates a certain percentage of their wage each pay period. This retirement income fund generally consists of a diverse group of stocks, bonds, retirement plans, etc.

However, the real plus in investing in this program to secure a retirement income for the future is that the company often matches what the employee donates. For example, if the employee donates 3% of their earnings into the 401 K then the company also contributes 3%, or the same dollar amount, into the employees 401 K as well.

It is important to note that there is generally a percentage or amount cap on what the employer will donate. For example, many companies will match the employee s contribution to their 401 K up to 4%.

Pension Plan

In addition to a 401 K plan many companies offer an additional retirement vehicle. This particular retirement benefit is a pension plan. Often this retirement income opportunity does not cost the employee any money, but is fully funded by the employer.

Also, in order to draw on the company s pension plan, often the employee has to be with the company for a set number of years. When this set number of years of service has been achieved, generally around five years, this is called being vested. In addition, when an employee reaches an additional level of service, they achieve the level of being fully vested.

Typically, the number of years of employment with the company dictates what the individual s pension and retirement income will be when the employee reaches the age to draw down on this pension. Generally this level is a mathematical equation that is based on years with the company as well as what income range of the employee. Generally, the salary range used for calculation takes the average salary over the last 5 years.