Is a cash-balance plan better than a pension?
- What is a cash-balance plan?
- Is a cash-balance plan better than a pension?
- Do I have to do anything to manage my plan?
- Can my employer convert a traditional pension to a cash-balance plan?
- When can I get access to the money?
- Should I take a lump-sum payout or monthly payments?
- I'm required to take a lump sum, but I want monthly income. What can I do?
- If I have a cash-balance plan, do I need to save anything extra?
A cash-balance plan is great if you're young and plan on job-hopping. But if you work for one company for a very long time - good luck pulling that off these days! - the total amount you'll get from a traditional pension plan is typically bigger than what you'll get from a cash-balance plan. That's because the formula for a traditional pension gives heavy weight to your average salary over the last few years of employment. With a cash-balance plan, it's a simple average of every year's salary.
But it's not like you're going to be able to choose between them anyway. Generally, a company offers one or the other - or none at all.
