Qualified Pension Benefit Limitations
Your pension plan represents a retirement plan that your employer contributes to on your behalf. The pension plan is a savings plan that supplements Social Security and your own personal savings. But, this savings plan is limited in terms of the pension benefits it can offer to you. You should understand these benefit limitations so you can make a personal savings plan that meets your needs.
Other People Are Reading
-
Significance
-
A pension plan makes payments to you when you retire. This pension plan is funded by your employer and invested in conservative investments that are expected to meet the future benefit payment promises. In some instances, these investments are guaranteed insurance policies that will meet your future promised benefit payment. These plans are also called "defined benefit plans" since the benefit received is a guaranteed monthly payment.
Limits
-
The IRS limits the amount of money you may receive from a pension. Every year, the IRS reviews the limits and sets the limit based on its determination of the need for an increase due to a cost of living increase. For 2011, the IRS sets the limit at $195,000 annually for defined benefit plans.
-
Benefit
-
The benefit limit is set quite high for many people. It may be unlikely that you will reach this benefit limit in your pension plan. It is entirely likely that you'll have enough income from your pension plan to live on when combined with personal savings and Social Security. The IRS also reassesses the limit each year based on inflation so this benefit limit may increase over time.
Consideration
-
You should consider developing a strong personal savings. Even though IRS limits are high, your employer may not fund your pension at levels anywhere approaching this limit. A pension is part of a total retirement plan that should include Social Security, the pension from your employer and your own savings that you control directly.
-
