After retirement, managing finances without a regular income can be quite a challenge. In such instances, pension plans can act as a safety net for seniors. A pension plan is a financial tool that ensures that seniors have guaranteed incomes even after retiring. To further add to the convenience, there are various pension plan options for seniors, offering financial assurance regardless of their age, helping them enjoy peace of mind during their golden years.

1. Defined Contribution Plans
While not all employers in the country offer pension contributions to their employees, there are some who do. One of the most common employer-offered retirement plans is the defined contribution (DC) plan. In this type of plan, an employee needs to contribute some of their income during employment towards this plan. Then, in their retirement years, they can withdraw funds from this contribution.

401(k) plans are the most common defined contribution plans that most employers offer. In the case of 401(k)s, employees are given two options— they can either contribute tax-free funds and then withdraw funds with tax cuts or contribute funds with tax cuts and withdraw tax-free pension amount. Another major benefit of 401(k)s is that the amount invested in it grows over time, with compounding. So, the longer the money is kept invested, the more it will grow. This can especially benefit seniors over 70 who have invested in 401(k) and have yet to withdraw their amount.

Like 401(k)s, 403(b) plans and 457(b) plans are also DC plans; only 403(b)s are for public schools and charities, and 457(b)s are for employees of state and local governments.

2. Defined Benefit Plans
Yet another type of employer-offered retirement plan is the defined benefit program. The traditional pension system— wherein an employer fully contributes toward their employees’ pension— is a type of defined benefit plan. Here, an individual can begin receiving a fixed monthly income when they retire. Also, these pension plans offer payouts for as long as one lives. So, seniors who are beneficiaries of defined benefit plans can have peace of mind, knowing they will receive a monthly pension at a fixed rate for their whole lifetime.

3. Social Security Retirement Insurance Benefits
The Social Security Administration has a special pension program for seniors called the Social Security Retirement Insurance. It works as a traditional pension plan, wherein an individual can receive monthly payouts during retirement years. The amount of those payouts is based on certain factors, such as the person’s income during their employment years, total term of employment, and their Social Security contributions. The Social Security Retirement Insurance Benefits can only be accessed by seniors over 61. Also, seniors would need to apply to begin receiving their monthly payouts. If the seniors wait longer to start receiving their payouts, their payout amount can increase. So, this pension option can be especially beneficial for seniors who have waited till the age of 70 to receive their benefits.

4. Guaranteed Income Annuities
Besides employer-offered and state-funded pension options, individuals also have the option of creating their own retirement planning system. This option is called a guaranteed income annuity, which is basically a contract sold by an insurance company. As a part of this contract, an individual must pay a particular amount to the insurer, based on which the company will then provide monthly payouts to the individual. These payouts can begin whenever the individual requires them. So, if one has invested in a guaranteed income annuity, it can work as one’s pension plan during their senior years. The only catch with these payouts is that, unlike its alternatives, they are a form of taxable income.

5. The Federal Thrift Savings Plan
Also known as TSP, the Thrift Savings Plan is only available to government employees and individuals who have served in the uniformed services. Like the 401(k), the Thrift Savings Plan is also a type of defined contribution plan. This means that to receive monthly pension payouts after retirement, one should make regular contributions to the plan from their paycheck. The organizations also offer automatic deductions from paychecks to employees who wish to be a part of the plan. A great advantage of the Thrift Savings Plan is that employees are offered diversified investment options. This means they can choose where their contributions will be invested, including bond funds, index funds, small-cap funds, etc. So, seniors who have contributed to a Thrift Savings Plan also have the option of receiving monthly payouts through it.

6. IRA
An Individual Retirement Account, or IRA, is a type of retirement plan the federal government offers for seniors. An IRA is a long-term savings account offering tax advantages and growth of the invested funds. So, the amount of money that individuals add to this account can grow over time with the help of investments. By the time they retire, the amount will have grown significantly, which can act as a safety net in their retirement years. Like 401(k)s, IRA too offers two options for contributions and withdrawals. Individuals can choose to pay taxes on the amount they contribute, and their withdrawals will be tax-free (Roth IRA), or they can make tax-deferred contributions and pay taxes from the withdrawn amount (traditional IRA). Since IRAs are designed for the retirement period, they offer withdrawals after the age of 59½ years. Also, because the IRA amount grows over time, this pension option can be especially beneficial to seniors over 70 who are yet to make their withdrawals.