Statistics available from the Bureau of Labor Statistics Employee Benefits Survey show approximately 90% of nurses receive retirement benefits from their employers. That figure is higher than 71% of workers from other careers.
Nurses devote their time, knowledge, and attention to countless patients throughout their careers. For many of them, it is a hard and fulfilling job at the same time, however, they deserve to earn well, including the benefits that follow after retirement.
Whether you’re a registered nurse or a nursing student, you should know that it’s never too early to plan for your future. Also, with the present downturn in the economy, it’s a wise move to figure out where your finances stand in the next couple of years.
Part of that includes checking out various information on post-career benefits and if indeed, nurses receive pensions upon retirement. In most cases, nurses get pensions for their years of active service, but that’s not always the case.
This article answers the question and goes ahead to provide significant information concerning nurses’ pensions.
Do Nurses Receive Pensions?
Generally, the answer is yes, but where you work plays a significant role, while a small minority of nurses retire without pension benefits. Nurses, especially registered ones, receive pensions, but with approximately 1 million nurses retiring or contemplating retirement in the next five to ten years, pensions will come in handy.
Whether you choose to retire early or continue serving in some capacity, it’s important to give some attention to financial plans for stability after retirement.
Retiring can take an emotional and psychological toll on you, so you wouldn’t want to add a financial one to the mix. It’s a major transition to a new life, hence the need to plan for it while working for the government or other establishments. That said, nurses are largely expected to receive pensions, more than many other professions in the United States.
Nursing Roles That Receive Pensions
Where you live and work has an impact on your earnings as a nurse, and the kind of pension you eventually get. Flowing from that, there are three main ways to get a pension as a registered nurse in the United States:
As a Government Employee
Perhaps you work for the local, state, or federal government. More than 90% of the time, government nurses in the military, schools, public hospitals, etc., are eligible for pensions.
As part of a Nurse’s Union
An active nurse’s union often means better-negotiated compensation and benefits, including pensions. For example, members of the National Nurses United see their retiree health benefits begin at 55.
As an Employee of a Large Corporation
In most cases, companies with hundreds of employees include nurses in their pension plans.
From these three categories, nurses are almost always part of the defined benefit (DB) pension plans that guarantee that they receive a specific allowance after retirement. Depending on the contract or conditions of engagement, your employer will use a predetermined formula to calculate your retirement income.
That can amount to a monthly payment or a one-off lump payment. Overall, DB.s are the gold standard of pension since the amount you’ll receive is promised in advance.
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Differences Between Pension Fund and 401(k)
Some people confuse pension funds and 401(k) plans, or even reason they’re the same. But that’s not the case because rather than 401(k), nurses receive a pension fund. Still, it’s not uncommon to have some nursing roles with both 401(k) and pension.
The two of them are designed for retirement planning and function differently, too. For pensions, you have a fund that’s untouchable until retirement. Besides, the employer’s contributions make up the bulk of the funds.
On the other hand, most 401(k) plans include an early withdrawal option. Also, 401(k) is majorly financed by contributions from the employee.
These two pension benefit plans are beneficial to nurses. But it’s important to note that the employers choose which one they will offer to their nurses.
What Happens to Your Pension After Quitting?
You can decide to quit your current nursing position to pursue new interests in the career or relocate to a new state of practice. Whatever the case is, you will have these three options available to you:
- You can elect to take your current pension amount as a lump sum;
- You can settle for an annuity. That means receiving guaranteed regular payments later on;
- You can choose to take both options above.
Note that you’ll only become eligible to receive the total amount of your pension if you are fully vested on leaving. That means you must have earned enough service credit to qualify for a pension benefit when you meet the minimum age requirements set by your retirement plan. Most times, that means working for an employer between five to seven years before quitting.
Calculating how much Nurses Earn From Pensions
It’s a known fact that pension payments depend on several factors. For this reason, whipping up a direct average figure presents a challenge. What’s more, calculations vary from state to state, but employers mostly stick to three parameters.
- Your salary at the age of retirement
- Your length of service
- Your age
The formula from these three factors will help you calculate your annual pension payment. That reads: Years of service x Benefit multiplier x Final average salary.
The multiplier is often set or defined by your employer, which is around 1 – 2.5% in most cases. As for your final salary, it represents the average derived from your last three to five years of working.
Hypothetically, if you have worked for 30 years making an average of $95,000 per year in your final three years with a multiplier of 2.5%, your formula would read like this:
30 x 2.5(%) x $95,000 = $71,250
From the calculations above, you can expect to get the total figure after retiring.
Budgeting Tips for Nursing Retirement
It’s essential to plan for the future and there’s no starting too early. You wouldn’t want a situation where you’re reliant on your pension. Whether you’re a year into service or more, these tips can help you:
- Set up a realistic budget that covers different financial obligations, such as student loan payments, housing, and food) and variable expenses like hobbies, living expenses, etc. This way, you can track your actual expenses and determine how much you want to dedicate to your retirement savings.
- Listen to a financial advisor to understand the options available to you. You can avoid certain money pitfalls when you want to save or invest.
Now that you know that nurses get pensions, you can begin to check out the retirement benefits offered by employers. The nursing profession takes some doing but it comes with many potentials, especially for high earnings and retirement benefits.
Whether that’s with the government or private facility, nurses have pension plans available to them more than many professions. Moreover, you can join a union that helps nurses to negotiate higher earnings and pensions.
On a final note, the average age of a nurse starting is 30 years old and one day, you’re going to retire or quit your job. You can start planning your retirement now so that you can get off with a worthwhile pension and healthy bank balance.