Retirement Retirement Planning

6 Things We Miss About Pensions (And 4 We Don't)

Contrary to popular belief, pensions come with a few potential drawbacks.

By Sarah Sharkey

Edited by Chris Kissell

Updated April 24, 2025

Pensions aren't common anymore. Since the introduction of the 401(k), companies generally have stopped offering pensions. But many people miss the days when the need to save for retirement did not rest squarely on the shoulders of workers.

Here are some things we miss about pensions — along with a few things we don't. Keep the advantages and disadvantages of pensions in mind as you are planning for retirement.

We start our list with the pros of pensions.

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Benefits are guaranteed

The star perk of a pension is the guaranteed income benefit that comes with it. Pensions typically pay out a steady stream of income during retirement.

For retirees, the peace of mind that comes with this guarantee sets pensions apart from many of today's other retirement planning options.

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Benefits typically last for life

If you retire with a pension, you can generally expect the benefits to last for your entire remaining lifetime.

For some people, that option is much better than having to worry about whether or not your investment portfolio will last as long as you do.

You don't have to make contributions

In most cases, it is the employer that makes contributions to the pension plan on your behalf. Unlike a 401(k) plan, employees are not required to make contributions out of their own paycheck.

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Benefits can be passed on to a spouse

Pension plans often allow workers to pass on their remaining benefits to a beneficiary, such as a spouse.

However, some pension plans do not allow this. So, make sure to read the fine print. That way, you will know exactly what you are getting with your pension plan.

Benefits offer more certainty when budgeting

The pension benefits you can expect to receive are usually clearly defined. For example, you might know that you'll receive a $1,000 check twice a month for the rest of your life.

This level of certainty gives you an opportunity to be more confident when mapping out your retirement budget.

Some pensions have COLAs

Some pensions offer a cost-of-living adjustment (COLA) that increases your benefit over time to help keep pace with inflation. This is most likely to be the case for those who work in government jobs.

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Things we don't miss about pensions

Of course, as with any financial product, pensions come with some drawbacks. Here are some things we don't miss about pensions.

It is difficult—or impossible—to make withdrawals

Generally speaking, you cannot access the money in a pension until you retire. This differs from a 401(k) plan, where you can withdraw the money as long as you are willing to pay taxes and penalties.

Pensions are less portable

If you have a pension and leave your job, you might not be able to take some or even all of your pension funds with you.

However, those with 401(k) plans typically can either leave the money in their account or roll it over into an IRA.

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You have no say in how the money is managed

With a traditional pension, you have no say in how the money is managed. By contrast, you control the investment choices in a 401(k) plan.

If you prefer a hands-on approach, a pension might not be best suited to you.

There is a risk of bankruptcy

If the employer makes unwise investment choices or the company goes bankrupt, you might not receive your expected pension benefits.

There are federal programs that protect at least a portion of these benefits when a company goes under. However, there is still some risk that you won't get all that you anticipate.

For retirees who didn't save in other ways, this can be financially devastating.

Bottom line

A pension can take the onus of saving for retirement off your shoulders. But this type of benefit also has a few drawbacks.

If you are eligible for a pension, keep these pros and cons in mind. And if you don't qualify for a pension, now is the time to get to work on saving so you will be able to stretch your retirement dollars further during your golden years.

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