In prior generations, workers could expect to put in 20 or 30 years at the same job and retire on a pension. Those who fulfill minimum employment years fairly early could even work another job while drawing a pension. It was a good setup for company loyalty and options for an early and well-funded retirement. Unfortunately, many industries found this retirement model to be unsustainable in the long term. Accordingly, the United States has seen a shift moving away from traditional pension plans and toward defined contribution plans such as 401(k) plans.
While pension plans typically cost employers more money, there are some benefits. Lower turnover rates and lower average wages can sometimes offset the expense. After all, some workers might accept less income and stick around longer if long-term employment is rewarded with a pension. So while pensions are quickly becoming a thing of the past, here are four industries where they can still be found.
One industry that still commonly offers pensions is the public sector, including government jobs at the federal, state and local levels. These pensions, also known as defined benefit plans, often provide a guaranteed monthly payment to retirees based on their salary and years of service. Federal government employees, for example, are eligible for the Federal Employees Retirement System (FERS), which includes a defined benefit plan as well as a defined contribution plan (Thrift Savings Plan).
There is a great deal of variance in these pension plans. Some have a hard requirement regarding the number of years employed for any eligibility whatsoever. Others allow workers to qualify for increased pension benefits as they hit employment milestones. For example, an Arkansas State Department of Human Services social worker might qualify for a very small pension after only five years. That way, even if they change jobs at six years, the partial pension would go into effect upon retirement years later. In a different state, the same position might not be eligible until the person is there 20 years but they would qualify for full benefits upon this milestone.
Military pensions often provide a source of retirement income for military veterans. Service members who have served for a certain number of years, usually 20, are eligible for retirement pay. This is a fixed amount based on rank and years of service. Additionally, the Department of Veterans Affairs provides various benefits to veterans, including disability compensation, education and training opportunities, and home loans.
So if you start your military service at a young age, you can potentially begin drawing retirement pay in your 40s. If you want to plan far ahead for your retirement, set rank goals and take the necessary courses and training to achieve that.
Another industry that still offers pensions is the utilities sector, which includes electric, gas and water companies. These companies often have unionized employees and negotiate pension plans as part of their collective bargaining agreements. Additionally, many unions in the transportation industry, including the railroad and trucking industries, still offer pensions to their members.
The education sector, specifically colleges and universities, often still provides pension plans to faculty and staff. However, this field has seen some migration from pension plans to standard 401(k) plans. Public education mostly uses 403(b) plans, which essentially operate as 401(k) plans for nonprofit and tax-exempt organizations.
So if you’re starting on the path toward becoming an educator, you might end up with a pension at the end of your career. However, as the years go on, that possibility is becoming less likely to occur.
It is worth noting that while these industries still offer pension plans, they may not be as generous as they once were. The pension plans might pay out lesser amounts or require more years of service for full eligibility. For example, a fire department might change its pension plan for all individuals who started at the department after a certain year. Perhaps everyone who started in 2015 or prior receives 75% of their income after 25 years with the department. Those who were onboarded after 2015 might only receive 50% of their income after 30 years of service.
Additionally, companies in some of these industries may be phasing out pension plans in favor of defined contribution plans or other forms of retirement savings. Some industries might have a mix of both pension and 401(k) plans, usually as a transitory measure while eliminating the pension plan. In these instances, certain people may have different participation levels in the plans depending on numerous factors. These include how long the employee worked there and collective bargaining agreements, among others.
In summary, while the trend in the United States has been toward defined contribution plans such as 401(k) plans, some industries still offer pensions as a form of retirement income. These industries include the public sector, utilities and transportation, education and the military. However, it is important to note that the generosity of these plans may vary, and some companies in these industries may be phasing out pension plans.
Before choosing a career path that touts its pension plan, remember that it might not be in place when you’re ready to retire. You can enjoy the pension benefits if they come through, but it’s recommended to have additional retirement sources as a contingency plan.
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