Those of us who work for companies that have both 401(k) plans and defined-benefit pensions are in luck.
New rules allow workers to transfer 401(k) assets into an employer's pension plan, and the transferred 401(k) money will be guaranteed by the Pension Benefit Guaranty Corp. (PBGC), USA Today reports.
The 401(k) plans let you contribute a portion of your pretax earnings (sometimes matched by the company) to a range of mutual funds. Your retirement payout depends on the performance of the funds.
A company pension plan guarantees you a defined amount of income for the rest of your life, depending on your salary and years of service.
A pension plan is safer than a 401(k), because your payments are guaranteed, unless both your company and the PBGC go under. But a 401(k) can offer you more income than a pension if the mutual funds perform very well.
The new rules are "good news for employees," Robyn Credico, head of defined contribution consulting at Towers Watson, told USA Today. "Allowing 401(k) participants to roll their money into a defined-benefit plan is the most efficient form of annuity that employers can offer."
U.S. News & World Report offers several year-end tips on 401(k)s.
One is to make sure you're giving all you can to your 401(k) plan. If you're 49 or younger, you can contribute as much as $17,500 to your 401(k). You'll want to contact your company's human resources department quickly if you seek to increase your contribution for the rest of the year.
"You can't call on Dec. 29 and say you want to put in an extra five grand," Joyce Streithorst, a financial planner for Frisch Financial Group, told U.S. News. "They need to have a little lead time of at least one paycheck and sometimes two."
© 2022 Newsmax Finance. All rights reserved.