What is a Pension?

“Pension” – a word you hear tossed around by public employees nearing retirement. But what is a pension fund, you may ask? A pension fund, in laymen’s terms, it is a fund many contribute to throughout their career. In Kentucky, state employees (teachers, school faculty, firefighters, police officers, nurses, etc.) pay into a function over the tenure of their career. At the time of retirement, a person receives a regular payment from their pension fund.

But what happens if the pension fund is not managed properly and the money isn’t there for you when you retire? This is the purpose of the Kentucky Public Pension Coalition. We look to insure that you will have retirement security.

Facts on state and local government pensions (via the National Public Pension Coalition)

“Retirement systems remain a small portion of state and local government budgets. State and local government pensions are not paid out of general operating revenues, but instead, a trust that public retirees and their employers contributed to

while they were working. The portion of state and local government spending dedicated to retirement system contributions is about three percent.

While some pension trusts are fully funded (they have enough assets in the trust now for all pension obligations), following the recent market decline, plans will need to increase their contribution levels to five percent on average to return to full funding.”

Pension Benefits

“Pension benefits are the income paid out by pension plans. While pensions are not typically taxed during the accrual phase, they are generally taxable as ordinary income in retirement, when the worker begins to receive the income. For tax-deferred pension plans such as 401ks, the worker must begin taking withdrawals, and paying taxes on those withdrawals, by April 1 of the year following the year in which they turn 70 and a half.” via ehow.com


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