Why a Defined Benefit Plan is not a Retirement Plan

Having a job that offers a defined benefit plan doesn’t free you from the responsibility of planning for your retirement. It seems everyone wants a government job these days, and the defined benefit plan is a big reason and less about the appeal of serving the public that the job entails.

You should avoid doing jobs you dislike because they offer a defined benefit plan. Perhaps it’s just me, but 30 years seems oddly long to do something you don’t like because most pension income will likely not pay enough to maintain your current lifestyle.

It’s a challenging world out there, and many changes are occurring that most of us are unsure where to begin. Real estate prices are going through the roof, wages continue to be flat, and the stock market seems too risky. Finding a job with a defined benefit plan seems safe in an increasingly more complex and uncertain world.

But is giving up 30 years of your life for minimum security worth the risk of being at the mercy of your employer? Even if you love your job, why wouldn’t you want to be in control of your retirement?

It would be best to look at everything a job offers, including the pension benefits. You usually have to work a certain number of years to collect the full pension benefit. For example, you might need to work for 30 years to collect the full pension benefits.

Putting your retirement plan on your employer can entrap you and sometimes cause you not to take up new opportunities because your employer offers a pension plan. It would be best if you took full advantage of my employer’s benefit plans while avoiding adopting the mindset they are responsible for your retirement.

Ensure you’ve enrolled in the pension plan; once you’ve done that, review it annually and pay it no further attention. Go about your life and put money away towards your personal retirement plan as though you didn’t have a pension. Do not factor in your employer’s pension plan; indeed, do not let anyone tell you that you do not need to plan for retirement because you’ve got a defined pension plan.

Factor in your employer’s pension plan when you’re five years from retirement. The reason is to avoid the pension directing how you make decisions during the most active years of your life. By the time you are five or ten years from retirement, you will likely be staying at the job and able to collect the full pension benefit.

Before that point, continue to plan for your retirement on your own. You will provide far greater flexibility and ensure you are the master of your retirement. It’s best to avoid being entirely dependent on your employer for your retirement plan. Taking ownership of your retirement ensures you stay engaged and control how your retirement looks, not how your employer wants it to look for you.

Plan for your financial future because no one else will care about your money as much as you.