| Type | Cost | Details | Notes |
|---|---|---|---|
| Budget | $500 | DIY / basic | Low-fee option |
| Mid-range | $1,000–$5,000 | Standard service | Good value |
| Premium | $10,000+ | Full-service | Highest quality available |
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| Factor | Pension | 401(k) |
|---|---|---|
| Funding | Employer funds it | You + employer match |
| Benefit amount | Fixed formula (years × salary %) | Depends on investments |
| Investment risk | Employer bears risk | You bear risk |
| Portability | Usually not portable | Always portable |
| Inflation protection | Some offer COLA | Depends on investments |
| Typical payout | $20,000–$60,000/year | Varies widely |
Traditional pensions are increasingly rare in the private sector — only 15% of Fortune 500 companies still offer them (down from 60% in 1998). Government employees (federal, state, local, military) still receive pensions. If you have a pension, the critical decision at retirement is lump sum vs monthly payments. Monthly payments provide guaranteed lifetime income; lump sums give flexibility but require careful investment management. Most financial advisors recommend the monthly pension for retirees without significant other savings.
The true cost of pension extends well beyond the sticker price. Fees, tax implications, opportunity costs, and time horizons all factor into the real cost of any financial decision. Evaluating only the upfront cost without considering long-term impact leads to consistently poor financial outcomes.
Individual circumstances drive the right choice more than general advice. Your tax bracket, timeline, risk tolerance, and existing financial picture all influence which option delivers the best outcome. What works for someone in their 20s with decades of compounding ahead is very different from what makes sense for someone approaching retirement.