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A pension is a type of retirement account. It is usually managed by the employer and the contributions are made by both the employer and employee with some limitations on how much can be contributed. A pension is an agreement that legally obligates one party to provide compensation or other benefits in exchange for services rendered, either now or at some future date. Persons who want to save for their retirement benefits could set up an IRA (Individual Retirement Account) or a Roth IRA, but there are other types of retirement accounts as well. For instance, you can have a 401(k), 403(b), and 457 plan, all of which could be employer sponsored and therefore require less work on the part of the employee to set up.

A pension plan may be set up for the use of one workplace or could be shared by several employers. Generally, a person is eligible to join a workplace pension once they have been employed there for three months, but this may vary between companies. There are different types of pensions that can be offered depending on the company’s needs and wants.

Pensions are useful because they do not disappear when you leave your job and can be passed on to your spouse or family if desired. There is also the opportunity for tax efficient withdrawals, as well as a guarantee that if something unfortunate such as death or unemployment should come up, at least some of the money will remain available. This could be especially helpful for those who are self-employed and have no other form of savings.

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