A Brief History of Retirement |
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Since the Social Security Administration was created in 1935, the concept of putting aside some money now to be assured income in the future has revolutionized retirement for millions of people. Exactly how that assurance works is constantly being redefined.
Some employers offer defined benefit plans, which promise you a specific income, called a pension, after you retire, typically based on the number of years you work at the job and what you earn. Others offer cash balance plans, which calculate your pension based on a fixed return of an amount contributed each year in your name.
Still other employers offer defined contribution plans, such as profit-sharing or money purchase plans. These plans don’t promise a specific pension but provide retirement income based on:
- The amount that’s contributed to the account
- The way the contribution is invested
- The return the investments provide
Most employers who offer retirement plans provide one type or another. However, some employers have switched from defined benefit to a cash balance or defined contribution plan. Both types are portable, which means you can move your assets when you leave an employer.
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