 TITLE: What Is a Pension Fund? CONTENT: What Is the Difference Between a Pension Fund and a 401k?\n---------------------------------------------------------\nBoth a pension fund and an employer-provided 401(k) enable you to save money for retirement, but they differ in a few key ways.\nA pension plan promises a certain monthly benefit when you retire. It may be several hundred dollars a month or, more often, it involves a formula that takes into account your salary and length of employment. Normally, pension plans are protected by federal insurance.\nAmong the advantages of a pension fund are:\n*   Hefty benefits can be built up over a short period, even if you take early retirement.\n*   Employers can contribute more than they can under other types of retirement plans.\n*   Benefits are insured.\n*   The amount of benefits doesn't depend on how the fund's assets perform.\nDisadvantages of a pension fund include:\n*   Choosing a benefit for your survivors will cut into your monthly benefits while you're alive.\n*   If a retiree is single when they die, the pension benefit can't be inherited by the retiree's heirs.\n*   Unlike a 401(k), you can't withdraw a lump sum from your pension to cover expenses such as medical costs or a child's college tuition without a pension advance.\n*   Monthly pension benefits can stay flat over time, without any adjustment for inflation.\nBy contrast, an employer-sponsored 401(k) does not promise a set amount of money per month. You and your employer can make tax-deferred contributions to a 401(k), which—coupled with investment gains and losses—will dictate how much money the account ultimately contains by the time you retire. Investments in 401(k) accounts, such as stocks, bonds and mutual funds, are not federally insured.\nAmong the advantages of a 401(k) are:\n*   You're in the driver's seat when it comes to 401(k) contributions. You can chip in as little or as much as you'd like.\n*   When you leave a job, you retain ownership of a 401(k).\n*   Contributions to a 401(k) come out of your paycheck before federal taxes are withheld. You don't pay taxes on the money until you withdraw cash from your 401(k).\n*   Many employers match part of your contributions up to a certain percentage of your annual pay.\nDisadvantages of a 401(k) include:\n*   Management fees can eat into your investment gains.\n*   You may be penalized for withdrawing money before age 59½.\n*   You may have little control over the quality and quantity of investments.\n*   Monitoring your 401(k) investments may require a fair amount of work on your part. END