…(read more)
LEARN MORE ABOUT: Retirement Pension Plans
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Pensions and Social Security are two crucial pillars of the social welfare system, playing a vital role in ensuring the financial security of individuals in their later years. These safety nets are designed to offer support to retired individuals, providing them with a regular income and access to crucial benefits. In this two-part article, we will delve deeper into the concepts of pensions and Social Security, examining their importance, functionality, and the challenges they face.
Let’s begin by exploring pensions. A pension is a form of retirement plan that individuals contribute to during their working years. It serves as a source of income after retirement, supplementing other sources such as personal savings. Pensions can be employer-based, provided by private companies, or government-funded, commonly known as public pensions. The goal is to offer retirees a means of sustaining themselves financially during their non-working years.
Employer-based pensions, also known as occupational or workplace pensions, are established by employers to provide retirement benefits for employees. These plans are usually structured as defined benefit or defined contribution schemes. In a defined benefit plan, the employer guarantees a specific payout amount based on factors like salary history and years of service. On the other hand, defined contribution plans, such as 401(k)s, allow employees to set aside a portion of their salary into an investment account, with the employer potentially matching contributions up to a certain limit.
Public pensions, on the other hand, are funded by the government and provide retirement benefits to eligible individuals. These pensions are often financed through mandatory contributions from both employees and employers, along with general tax revenues. The eligibility criteria and benefit calculations for public pensions vary widely among countries, depending on factors such as age, years of service, and average income. In some cases, public pensions are means-tested, meaning that the amount received takes into account an individual’s income and assets.
Now, let’s shift our focus to Social Security. Social Security is a government-run program that provides income and benefits to retirees, disabled individuals, and the surviving families of deceased workers. It operates on a pay-as-you-go system where current workers contribute a portion of their earnings through payroll taxes, and these funds are then used to support eligible individuals. Established in the United States in 1935, Social Security has since been adopted by many countries around the world.
The benefits provided by Social Security encompass retirement income, disability insurance, survivor benefits, and healthcare coverage through Medicare. This program aims to provide a safety net for individuals who have paid into the system during their working years, ensuring that they are not left without financial support in their later lives.
In the second part of this article, we will delve into the challenges faced by pensions and Social Security, including issues related to an aging population, funding gaps, and potential reforms. Stay tuned to gain a comprehensive understanding of these vital social welfare programs.
Understanding Pensions and Social Security (Part 1) appeared first on Inflation Protection.
