Do You Get a Pension If You Quit Your Job?

Pension plan payments are retirement benefits offered by employers. These benefit payments are provided through a complex formula that is determined when you are hired. This formula takes into account your future years of service with the company as well as your potential future income. But when you quit your job, you should understand whether you're entitled to any of this money.

Significance

The Pension Benefit Guaranty Corp. (PBGC) protects your pension benefits from being taken. Of course, you are not automatically entitled to benefits just because you worked for an employer. The PBGC outlines vesting schedules your employer may follow if he wants to restrict benefit payments to employees. A vesting schedule is a process where benefits are earned over time. A five-year-cliff vesting schedule provides no pension benefits whatsoever until the fifth year of service. A seven-year vesting schedule means you must earn benefits over a period of seven years, but each year gives you an increasing amount of earned pension benefit.

Benefit

As long as you've earned your pension benefit, your employer cannot take this benefit away. Even if the employer closes down the plan, the PBGC steps in to provide at least some of the promised pension benefits to you. This ensures that you have at least some of your pension benefits available at retirement.

Disadvantage

Your employer may decrease the pension benefit as he sees fit, which won't terminate the plan, but it will provide less than what was originally promised. The PBGC does not provide the additional shortfall in these cases since the plan is still active. If you leave your job, and you're not fully vested, you lose whatever portion of the pension you have not earned. This loss is permanent and cannot be regained.

Consideration

You should consider keeping something in the way of personal savings. This personal savings amount ensures that you'll have retirement savings, and this is under your control in terms of contributions. You may direct the investment in this personal retirement account and you won't lose any if you decide to change jobs.

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