Today's workers, unless they've been in the workforce a very long time with the same employer or work in certain public sector or union organizations, will never know what a retirement pension, or defined benefits plan, looks like in real life. That's because these retirement plans are going the way of the dinosaur, replaced by the defined contribution plan, typically a 401(k) account.
What's the difference? A pension plan pays a guaranteed amount each month based on salary and years of service. A 401(k) plan, on the other hand, depends on employee and sometimes employer contributions and reflects the performance of the investments within them.
While the vast majority of businesses now offer 401(k) plans for retirement, there's a great deal of difference between the most and least generous among them. For example, some employers offer a generous employer match and even additional contributions based on salary. Others offer a better mix of investment options with lower fees. It's a good idea to look at the fine print to see what you're really getting when you enroll.
If you are wondering which companies do the best job setting up their employees for financial security in retirement, take a look at our list for the best retirement plans.
1. ConocoPhillips (COP)
ConocoPhillips has a generous employee matching program – it automatically pays a 6% match after you invest 1% of your income. In addition, the company offers a discretionary additional match of between 0% and 6% based on company performance and other factors including employee age. The goal is a 9% total match. In addition, investment options are broad, including a mix of stock, bond and international index funds. Vesting is immediate at 100%. Enrollment is voluntary, but employees must contribute a minimum of 1% to receive the company's contributions.
2. The Boeing Company (BA)
Boeing transitioned all non-union employees from a pension to a 401(k) retirement plan in 2016, and the results have been amazing. With over $47 billion in assets, it is the second largest plan in the country. Employees can contribute between 1% and 30% of their salaries, and the company matches 75% of the first 8% of the employee's contribution. There's also a discretionary contribution of between 3% and 5% per year based on the employee's age. Boeing automatically enrolls employees in the plan, and there is a broad selection of stock, bond and international index funds to choose from.
3. Amgen Inc. (AMGN)
Amgen is another company with one of the best retirement plans, and is one of the more generous companies when it comes to employer contributions – it makes a 5% core contribution up front whether or not the employee makes a contribution to the plan. In addition, the company matches employees' contributions up to 5% of their salary for a total of 10%. There's also an employee stock purchase plan. Amgen's funds include a broad mix of stock, bond and international index funds. Employees are 100% vested immediately and are automatically enrolled in the plan.
4. Philip Morris International Inc. (PM)
You may have qualms about working for the king of tobacco, but Philip Morris does its best to reward and retain top talent. In addition to matching the first 5% of employee contributions, the company adds an additional 7% of eligible employee compensation for a total up up to 12%. There are no bond funds to select, but a broad range of stock and international index funds are available. Eligible employees are automatically enrolled and are 100% vested immediately.
5. Citigroup Inc. (C)
This banking giant does a good job with its retirement plans, matching 100% of the employee's first 6% of contributions. There's an additional 2% added in, but it's important to note that Citigroup makes its contributions in a lump sum at or after year-end and not at the same regular intervals that employee contributions are made. Fund options include stock and international index funds – no bond funds are available. Enrollment is automatic, and employees are fully vested immediately.