401(K) vs Pension Plan - Comparison Of The Retirement Plans (Which Retirement Plan Is Better?). In this comparison video I will talk about 401(K) vs Pension plan.

So, the main difference between them is the source of funds
A 401(k) is a retirement scheme from the employer that allows you, the employee, to channel part of your salary, pre-tax or post-tax, towards the scheme.
On the other hand, a pension plan offers you a fixed monthly benefit for the rest of your life. The employer makes the contribution on your behalf for your future benefit.
Therefore, a 401(k) is more beneficial as it allows you to dictate the amount of money you save towards your retirement.

Scheme structure
With a traditional pension scheme, you are guaranteed a fixed amount of monthly payment for the rest of your life. The money is guaranteed regardless of the investment performance.
On the other hand, you do not get a guarantee of payments for the rest of your life on a 401(k). Your payments are determined by the amount of money in the scheme.
Therefore, a pension plan is more favorable since you are guaranteed fixed monthly payments for the rest of your life.

Transfer
With a 401(k), you are allowed to transfer the scheme to your new employer if you change jobs. On the other hand, you cannot move a pension plan from one employer to the other.
Hence, a 401(k) offers you more flexibility to transfer your funds to a new scheme.

But do they have similarities?
Yes, they do. Both schemes are employer-sponsored and can guarantee you a source of income in retirement.

So, to sum up, how do they compare-401(k) and pension schemes?
What I like most about a 401(k) is that I can choose the percentage of my paycheck that goes into my retirement savings. At times, an employer will match my contributions, making my pot even bigger.
The other advantage I get from a 401(k) is the rollover option. I can choose to transfer my money from the scheme to an IRA, which gives me more control over how my money is invested. On the other hand, a pension scheme guarantees me a monthly payment for the rest of my life. Also, my employer contributes the money for me, which is convenient.
Overall, I prefer the 401(k) to the pension scheme because I determine how much money I save towards the scheme.

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