In this #short video, Don Anders breaks down the difference between the FRS Pension Plan and the FRS Investment Plan. If you’re in the Florida Retirement System and would like to learn more about your pension and investment options, follow us on YouTube, Facebook, and Instagram.

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There are various ways to save for retirement, but two common plans are the FRS Pension Plan and the Investment Plan. While both plans are designed to provide retirement benefits, they have significant differences in how they operate.

The FRS Pension Plan is a defined benefit plan, which means the benefits an employee receives in retirement are determined based on a formula that takes into account the number of years worked, the average of the employee’s highest five years of earnings, and a percentage factor. Employees typically contribute a portion of their salary into the plan, but the majority of the funding comes from employer contributions. One major advantage of the FRS Pension Plan is that it provides a guaranteed retirement income for the rest of an employee’s life.

On the other hand, the Investment Plan is a defined contribution plan, which means the employee and employer contributions are invested in a variety of funds selected by the employee. The value of the plan at retirement depends on the performance of the investments. While the Investment Plan does not guarantee a specific retirement income, it does offer flexibility and control over individual investments.

Another difference between the two plans is the vesting period. Under the Pension Plan, employees become fully vested after eight years of service, meaning they are entitled to the entire benefit even if they leave the job. With the Investment Plan, employees are always fully vested in their own contributions, but vested becoming fully vested in their employer’s contributions usually takes several years.

The FRS Pension Plan and Investment Plan both have advantages and disadvantages. The FRS Pension Plan provides an attractive option for those seeking a guaranteed retirement income for life, and it does not require any investment decisions or risk. However, it may not be suitable for those who value control over their investments or those who may not plan to work for the same employer for many years. The Investment Plan, on the other hand, offers flexibility and control over investment choices, but it requires more investment knowledge and comes with more risk.

In conclusion, the choice between the FRS Pension Plan and Investment Plan depends on an individual’s personal preferences, financial goals and risk tolerance. It is important for employees considering retirement savings plans to carefully evaluate the benefits and drawbacks of each plan and seek professional advice before making a decision.