Cash Balance Pension vs. Traditional Pension Explained

If you’ve been in your utility job for years and still don’t understand how your pension works, you’re not alone. In this episode, Steve takes a listener question from Lisa. She’s been working for 15 years and asked a commonly misunderstood question: What’s the difference between a cash balance pension and a traditional pension?

Tune in as Steve breaks down the key differences and why it matters. We’ll discuss how cash balance pensions are funded entirely by an employer, how they grow through interest credits, and how they can quietly become a major part of a retirement nest egg. You’ll also hear why understanding your pension type can shape how you manage your 401k, what makes a plan financially healthy, and smart steps to take to ensure you’re aligned with your retirement goals.

Here’s some of what we discuss in this episode:

📊 Traditional vs. cash balance pensions- what’s the difference?

💰 How a cash balance pension grows with guaranteed employer contributions and interest

🧠 Why your pension type should guide your 401k investment decisions

🛠️ Aligning your pension + 401k strategy

0:00 – Intro

1:23 – Traditional Pension

2:37 – Cash Balance Pension

6:13 – Why Utility Companies Offer This Model

10:25 – Is This Too Good To Be True?

14:05 – Next Best Steps

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