Is it possible to have a self pension investment account?

I work as a private contractor. I do have 401K. I wonder whether it is possible for me to have a Pension Account which helps to get a monthly payment on my retirement.

If so, what are the accounts or how to proceed?

  • are you looking for somethings besides a 401K, IRA, and Social Security? – mhoran_psprep Feb 15 at 3:45
  • @mhoran_psprep, yes that is correct. I am looking for something which are besides of 401K, IRA and Social Security. Just as most Govt Employees receive their monthly pension .. – goofyui Feb 15 at 15:03
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    If somebody has a pension it is because they worked for a company that had a pension. Most companies don't have these types of pensions anymore. – mhoran_psprep Feb 15 at 15:11

You can purchase an immediate annuity to secure a guaranteed monthly income stream for life, starting soon. Alternatively, I'm aware there exist similar instruments called deferred annuities which you pay for now (or possibly contribute to over some period?) and which give you guaranteed fixed income at some point in the future. Those might be specifically intended for retirement.

Note that the general consensus seems to be that annuities are a bad deal. I have looked at them and am not sure they're all that bad. It's like a cross between investment and insurance.

  • Thank you. Per my understanding Annuities are hybrid between investment and insurance. But , How does it work. Insurance never worked as Investment. – goofyui Feb 15 at 15:05
  • @goofyui A pension is also like a hybrid insurance product in that it defines a benefit you are "guaranteed" to receive for life. You are paying a premium (missing out on some investment returns) for protection (against outliving your income). A 30-year treasury bond is similar in a lot of ways to an annuity (if you are of retirement age) in that you give up market returns for a steady income. Annuities can give out a higher monthly payment than 30-year bonds typically due to not getting principal back at the end (and the chance you die early). – Patrick87 Feb 15 at 16:38

All a pension is is an investment account that provides a defined benefit after retirement. So sure, you can set up a pension for yourself; just invest in some account (it can even be an IRA) and after you retire just set up a specific distribution (letting the rest of the account continue to grow). Or use the money to purchase some sort of annuity if you want to formalize the payment.

The point is that pensions are not magical - the money you get must come from somewhere. For company pensions, the company funds the pension and must ensure that it has invested enough to be able to make the payments it promises. If you set up your own pension, you must fund it.

  • thank you.. so in addition to 401K, IRA .. next option would be Annuity ..? – goofyui Feb 15 at 19:00
  • Whether Annuity Investment has to be a lump sum payment??? Any idea on that – goofyui Feb 28 at 15:05
  • @goofyui I'm not sure what you mean - you "buy" an annuity so from that standpoint yes it's a lump-sum payment. – D Stanley Feb 28 at 15:15

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