- Employee benefits can be very expensive
- Benefits include more than just retirement plans
- Take advantage of your benefits while you have them
Do you know and understand the employee benefits you receive? There can be many of them, and they can encompass a number of different areas. From basic health insurance to concierge service and lawyer services, there can be any number of provisions by an employer, and it’s important to know what you have.
Besides looking to the future in terms of retirement, there can be benefits such as free lawyer consultations, lunch perks, and discounts at major retailers. But, of course, the major one is retirement savings because so many people fall behind on their own.
Employee Benefits in the United States
If you are working currently, planning for retirement is one thing you should consider. Retirement benefits help you stay afloat in your golden years.
Retirement benefits are part of your job benefits. And, in the United States, these benefits are dependent on where you work; with the government or private industry. In this article, you will learn more about retirement benefits in the United States.
Retirement Benefits For Private Workers
In the United States, federal workers and private workers have separate laws that regulate their retirement benefits. While the Employee Retirement Income Security Act (ERISA) is concerned with private workers, several laws are available for federal government workers.
ERISA provides two retirement plans; defined benefit plans and defined contribution plans.
A defined benefit plan offers a stipulated monthly benefit at retirement. Most likely, the plan may use a formula that takes into account such factors as service and salary to calculate your benefit. Alternatively, your benefit will be a specific amount of dollars per month at retirement.
The Pension Benefit Guaranty Corporation (PBGC) protects, within certain limitations, your benefits in a defined benefit plan.
A defined contribution plan works differently, the employer or the employee (or both) contribute to your account, sometimes at a set rate annually. The company invests these contributions to allow it to grow and then pays you at retirement based on your contributions plus or minus investment profits or losses.
The 403(b) plans, 401(k) plans, employee stock ownership plans, and profit-sharing plans are defined contribution plans.
Retirement Plans for Federal Workers
Social Security
The Social Security Administration (SSA), a federal agency in the US runs Social Security to provide retirement benefits, survivor benefits, and disability income.
Social Security is an insurance program that allows you to pay a certain amount through payroll withholding to earn up to four credits each year.
That money goes into the Social Security trust funds where it is used to pay benefits to those who currently qualify for them. The remaining money stays in the trust funds. To qualify for Social Security retirement benefits, you must not be less than 62 years and should have paid into the system for at least 10 years. However, if you wait till 70 to collect Social Security, you will receive higher monthly benefits.
FERS
This retirement plan gives benefits from three sources: Social Security, a Basic Benefit Plan, and the Thrift Savings Plan (TSP). If you leave the federal job before retirement, Social Security and the TSP can go with you to your next job.
The Basic Benefit and Social Security require you to pay from your payroll deductions each pay period. The TSP is an account that your agency sets up for you to deposit an amount equal to 1% of your pay into the account. To qualify for this plan, your age and number of years of creditable service count. In some cases, FERS considers your Minimum Retirement Age (MRA).
CSRS
The Civil Service Retirement System is a type of defined benefit retirement system. You are entitled to annuities and therefore share in the expense. You contribute 7-8% of your pay. The company you work with also matches your CSRS contributions.
This plan considers your age, the number of service years, and any other requirements to qualify you for benefits. Also, you must have taken up a responsibility that has CSRS coverage before your retirement.
Employee Benefits And You
Investing in retirement plans can help you meet your financial goals. You should find out the retirement plan that your job benefits provide. This will enable you to know whether you need to look for an additional retirement plan to boost your retirement benefit.
