The difference is that in the US “pension” refers only to a defined-benefit retirement payment issued by a former employer, whereas in other countries the definition also includes payments from the state (the equivalent of Social Security).
In the US, pensions have almost completely gone away, in favor of 401K programs. A pension is (typically) a monthly fixed income given by your former employer for the rest of your life upon retiring from a career.
The 401K program is more like a retirement savings account; you contribute a portion of your paycheck toward it each month and your employer will match your contribution up to a certain pre-designated amount. Whatever money is in that account becomes your own personal “pension” that you live off of after you reach retirement age. Instead of your employer putting aside money to pay retired employees, now you’re responsible for setting aside that money yourself, with a little extra contribution from your company.
Employers prefer the 401K program because they invest a little extra money into you initially, but then they don’t have to pay out a pension for the rest of a former employee’s life. So they save money in the long run. Meanwhile, your retirement depends on you being fiscally responsible early in your career instead of expecting a fixed income to cover you later in life.
People in the USA would likely describe it as being on Social Security, likely with some supplement as Social Security only pays for cat food and a van down by the river.
The difference is that in the US “pension” refers only to a defined-benefit retirement payment issued by a former employer, whereas in other countries the definition also includes payments from the state (the equivalent of Social Security).
In the US, pensions have almost completely gone away, in favor of 401K programs. A pension is (typically) a monthly fixed income given by your former employer for the rest of your life upon retiring from a career.
The 401K program is more like a retirement savings account; you contribute a portion of your paycheck toward it each month and your employer will match your contribution up to a certain pre-designated amount. Whatever money is in that account becomes your own personal “pension” that you live off of after you reach retirement age. Instead of your employer putting aside money to pay retired employees, now you’re responsible for setting aside that money yourself, with a little extra contribution from your company.
Employers prefer the 401K program because they invest a little extra money into you initially, but then they don’t have to pay out a pension for the rest of a former employee’s life. So they save money in the long run. Meanwhile, your retirement depends on you being fiscally responsible early in your career instead of expecting a fixed income to cover you later in life.
People in the USA would likely describe it as being on Social Security, likely with some supplement as Social Security only pays for cat food and a van down by the river.