 TITLE: What Is a Pension Fund? CONTENT: How Does a Pension Fund Work?\n-----------------------------\nA pension fund is what's known as a defined-benefit plan. This means an employee will receive pension benefits in retirement that make up a certain percentage of the annual salary they earned while working. A pension fund may be limited to one or several employers, or may have no restrictions on membership.\nSponsors of pension plans include Fortune 500 companies; federal, state and local government agencies; and school systems. Generally, employers contribute most of the money toward pension benefits. However, some plans require employee contributions, and others make employee contributions voluntary.\nPension contributions are invested in stocks, bonds, commercial real estate and even portfolios of student loan debt or credit card debt. While you lack control over how a pension fund invests money, you will receive the same monthly pension payment for the rest of your life, regardless of how the fund's investments perform.\nLike other methods of saving for retirement, pensions have their pros and cons, and promoters and detractors. According to the AARP National Retired Teachers Association, the \"traditional and best approach\" to retirement security comprises pension and Social Security benefits, along with individual savings.\nHowever, critics argue that some pensions are drastically underfunded and sometimes make risky investments. In some cases, the federal government ends up bailing out failed pension funds. Furthermore, some businesses in recent years have closed or frozen their traditional pension plans, which tend to be complicated and costly to operate.\nTake all factors into consideration when planning your retirement and go with the method you think would work best for you. You may find yourself agreeing with the AARP and including a pension as part of your retirement strategy alongside other methods, such as a Roth IRA. END