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time to provide us with income and benefits after retirement (albeit its benefits may be somewhat diminished as we go forward). Paying social security taxes throughout our working years can be considered a form of saving for our future. The problem is social security benefits for most of us are woefully inadequate if we want to maintain a lifestyle in our retirement years similar to that of our working years. It is not irrational to look forward to having social security benefits after retirement, but it is irrational to expect social security to cover all (or even the majority) of our expenses. For most of us that will never happen. Relying on just social security for retirement is a disaster in the making. Social security benefits are calculated based on a person’s lifetime earnings. In 2000 social security retirement benefits averaged about $800 per month per person. The maximum benefit for 2000 was about $1,400 per month. Social security retirement benefits start at age 62 but the qualifying age continues to go higher as we live longer.

Pension — Some companies or unions have pension plans where their retired employees or members are paid a certain amount of monthly benefit depending on their years of service and level of income. The payments are generated from a fund set up by the company known as a pension fund. The pension plans could be administered by the companies themselves or outsourced to other companies to manage.

While pension benefits can be a good source of supplemental income during retirement, they have some drawbacks. For example, one has to be vested (minimum 3 to 5 years of service) before one can be eligible for benefits.

Pension benefits are most beneficial to those with many years of service within the same company (20, 30, 40 years). Others with few years of service receive little or no pension benefits. There may be no …