Pension
An employer-funded retirement plan that pays a guaranteed income for life, based on salary and years of service.
What does pension mean?
Increasingly rare, a pension provides guaranteed lifetime income without you managing investments. At retirement you may choose between the monthly payments and a lump sum — a decision that hinges on health, other income and the lump sum’s value.
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Related terms
Pension — frequently asked
What is the difference between a pension and a 401(k)?
A pension (defined benefit) promises a set monthly income for life, funded and managed by the employer. A 401(k) (defined contribution) is your own funded account whose balance and payout depend on contributions and market returns.
Should I take a pension lump sum or monthly payments?
Monthly payments give guaranteed lifetime income and longevity protection; a lump sum offers control, investment upside and heirs. The right choice depends on your health, other income, and how the lump sum compares to the annuity’s value.