A Guide to Getting a Pension

A traditional pension plan provides a steady income to former employees. Once retirees meet the job tenure and age requirements, they receive regular monthly payments throughout their lifetime. A minority of private industry workers (17 percent) were provided with a traditional pension plan through their jobs in March 2018, according to Bureau of Labor Statistics data. However, a few career fields continue to offer traditional pension plans. Here’s how to get a job that will provide you with a stream of payments in retirement.

[Read: How Much You Will Get From Social Security.]

Get a government job. Among state and local government workers, 86 percent had a traditional pension plan in March 2018. “Traditional pensions are slowly disappearing, but they’re still widespread among government workers,” says Richard Johnson, director of the program on retirement policy at the Urban Institute. The federal government and most state and local governments provide traditional pension coverage to their employees, although the benefits have become less generous in recent years.” Primary, secondary and special education teachers enjoy almost universal (99 percent) traditional pension plan coverage. Members of the protective service — primarily police and firefighters — (89 percent) and those employed working with natural resources, construction and maintenance (90 percent) also enjoy strong rates of pension membership. Government workers involved in health care and social assistance (68 percent) or who teach at colleges, junior colleges and universities (82 percent) have slightly lower rates of pension coverage, although still much higher than in the private sector. Many state a local government employees (40 percent) remain eligible for the traditional pension plan if they work part-time.

Join a union. A union card just might be your ticket to better retirement benefits. Unions negotiate with company management for better retirement benefits for their members. That’s why 68 percent of union members continue to enjoy traditional pension plans, compared to just 12 percent of nonunion employees. “The two main groups of employees that still predominantly receive defined benefit plans include state and local government workers and private sector unionized workers,” says Caroline Crawford, assistant director of state and local research at the Center for Retirement Research at Boston College. “For private sector unionized workers, our research has shown a high concentration in the construction, manufacturing, transportation, retail trade and service industries.” Collectively bargaining for better retirement benefits often yields better results than negotiating on your own.

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Work for a big company. Large employers are much more likely to provide a traditional pension plan than small businesses. Among firms with 500 or more workers, 41 percent have a traditional pension plan. Only 19 percent of employers with between 100 and 499 workers provide a pension, and it drops to 7 percent among companies with fewer than 100 employees. “In the private sector, traditional pensions are still common among large, unionized employers, but they are almost unheard of in small employers,” Johnson says.

Join a very small firm. Most small businesses don’t provide traditional pension plans to employees, but the exception is ultra-small companies with five or fewer employees. Sometimes small groups of professionals, such as doctors, dentists or lawyers, will set up a pension to defer some of their compensation for retirement.

Move to the Northeast. Jobs in the Northeast are more likely to provide traditional pension plans than employment opportunities in other parts of the country. The New England and Middle Atlantic regions have the highest rate of traditional pension coverage, with 22 percent of private industry workers eligible for a pension. Pension access is the lowest in the southern and western states, where just 15 percent of workers have access to pensions.

Join the management track. Managers, especially those who work in business and finance, have better retirement benefits than most other occupations. Some 24 percent of private-sector employees in a management role have a traditional pension plan.

Work full time. Many pension plans are closed to part-time workers. While 20 percent of private-sector full-time employees have a pension plan, just 9 percent of their part-time counterparts are eligible to participate.

Earn a large income. Over a third (35 percent) of workers in the top 10 percent of the income distribution also have a traditional pension plan. Only 5 percent of people in the bottom quarter of the earnings distribution enjoy the same level of retirement security.

Carefully consider your profession. A few specific industries are especially likely to maintain traditional pension plans. The majority of employees who work for utility companies (73 percent) have pension benefits. Also, just under half (48 percent) of people who work for credit intermediation firms have pension plans. Other industries with above average rates of pension coverage include insurance carriers (44 percent), information services (33 percent), transportation and warehousing (33 percent) and manufacturing (24 percent). Leisure and hospitality jobs (2 percent) and especially food service are the least likely to provide retirement benefits.

Stay at the same job for much of your career. Working at a firm that provides a traditional pension plan doesn’t mean you will get payouts in retirement. You will likely need to work for a specific number of years for the same employer before you qualify. If you change employers, you might not qualify for any retirement payout at all, or only a very modest one. “Those benefits don’t work well when you have multiple employers throughout the course of your career,” says Alan Glickstein, managing director for retirement at Willis Towers Watson. “Traditional plans are very valuable as you get close to your retirement years, but the benefits do not accrue evenly over the course of your career.” Most pension plans are set up to provide the biggest rewards to people who spend decades with the same employer.

[See: How to Pay Less Taxes on Retirement Account Withdrawals.]

Marry someone with a pension. If you are or were married to someone who vested in a traditional pension plan, you may qualify for traditional pension payments, even if your spouse with the pension passed away. Traditional pension plans are required to provide qualified joint and survivor annuities to spouses. “The benefit pays you a somewhat lower monthly amount in exchange for a benefit that continues if you die for the life of your spouse,” Glickstein says.

Create your own pension. If you have some savings, you can create a stream of retirement payments using an immediate annuity. This insurance product provides payments that are guaranteed to last the rest of your life. However, they’re also known for fees, complicated mechanics and the risk that the insurance company could go out of business.

Adapted from “Pensionless: The 10-Step Solution for a Stress-Free Retirement” copyright 2016 by Emily Brandon and published by F+W Media, Inc. Used by permission of the publisher. All rights reserved.

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