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When it comes to planning for retirement, it’s important to consider the different options available to you. Two common retirement savings plans that many employers offer are pensions and 401(a) or 401(k) plans. Both offer a way to save for retirement, but they have some key differences that may impact your decision on which plan to choose.

A pension is a defined benefit plan that provides a guaranteed monthly income in retirement. With a pension, the employer contributes to a fund on behalf of the employee, and the employee receives a set amount of money each month once they retire. Pensions are becoming less common in today’s workforce, as many employers have shifted to 401(a) or 401(k) plans instead.

401(a) and 401(k) plans are defined contribution plans, meaning that the amount of money you receive in retirement depends on how much you contribute and how well your investments perform. With a 401(a) or 401(k) plan, you are responsible for making contributions to your account, and you have the ability to choose how those contributions are invested.

One of the main differences between pensions and 401(a) or 401(k) plans is the level of risk involved. With a pension, the employer bears the investment risk, so you are guaranteed a certain amount of income in retirement. With a 401(a) or 401(k) plan, you are responsible for managing your investments, so there is a greater level of risk involved. However, this also means that there is potential for greater returns on your investments.

Another key difference between pensions and 401(a) or 401(k) plans is portability. Pensions are typically tied to a specific employer, so if you change jobs, you may lose access to your pension benefits. 401(a) and 401(k) plans, on the other hand, are more portable, as you can typically roll over your account balance to a new employer or into an individual retirement account (IRA).

Ultimately, the decision on whether to choose a pension or a 401(a) or 401(k) plan will depend on your individual financial goals and circumstances. Some factors to consider include your risk tolerance, investment knowledge, and how long you plan to stay with your current employer.

It’s important to carefully weigh the pros and cons of each option and consult with a financial advisor to help you make the best decision for your retirement savings. Whichever option you choose, the important thing is to start saving for retirement as early as possible to ensure a comfortable and secure future.