pension

A payment, not wages, made to a person (or his/her family) after fulfilment of certain conditions of service; an organized retirement plan. Pension plans vary widely, with some pensions calculated at a specified percentage of a worker's income, payable annually after retirement. Others provide lump-sum savings available for withdrawal at age 65. Employers sometimes match employee contributions; some plans are strictly employee contributions plus interest. Some plans are mandatory, others voluntary.

The most significant provider of retirement income in the US is the Social Security Administration, funded through nonvoluntary contributions assessed on both employers and employees. Unions make employer contributions to pension plans an important element of their contract negotiations, and accumulated pension funds have become important sources of investment capital. Under federal tax regulations, individuals can deposit specified maximum amounts into personal retirement funds, have their income tax liability reduced by that amount as a deduction, and have taxes on the fund's interest deferred until they withdraw the money at or after retirement.