Retirement benefits encompass a range of programs or plans meant to provide support to individuals who no longer actively participate in the workforce due to reaching a pre-determined retirement age. These benefits often take the form of pensions, lump sum payouts, health care coverage, and sometimes continuing life insurance. For employees, retirement benefits serve as a key aspect of financial planning for their retirement years and are often provided by employers as part of the compensation package. There are two main types: defined benefit plans, where employees receive a guaranteed amount upon retirement based on a formula, and defined contribution plans, where contributions from the employee and sometimes the employer are invested and will provide benefits depending on the investment returns.
For example, many organizations in the USA offer a 401(k) plan, which is a type of defined contribution plan. Employers may match employee contributions up to a certain percentage, making it a valuable component of employee remuneration. Consider Jane, who worked for ABC Corp for over 30 years. Upon retirement, she can withdraw funds accumulated in her employer-sponsored 401(k) and also receive a monthly payment from a separate pension plan that ABC Corp maintained for long-term employees. Retirement benefits, thus, ensure Jane's financial stability in retirement.