Pension

• The pension plan is also sometimes referred to as a defined-benefit plan. This is because employees know exactly what they have to do to get a specific amount of benefit during retirement. For example, most defined-benefit plans are set up so that you know how many years it takes before you can retire. If you work a little longer, your retirement benefit payment will be a little bit higher. This allows you to decide exactly when you want to retire based on how much money you need.
  
  

Equity-Indexed Annuity

• The equity-indexed annuity is a type of investment contract that you can buy from an insurance company. You can buy this investment with regular payments to the insurance company or through a lump sum. When you reach the age of 59 1/2, you can start receiving payments from your annuity contract. The payments can be set up to last for the rest of your life, the lives of you and your spouse or for a certain number of years.
  
  

Returns

• Both of these investments earn a return based on the performance of the financial markets. With a pension, a fund manager is in charge of making the investment decisions for all of the money in the plan. The pension is fully funded by the employer and then the money is invested in the financial markets to earn a return. With an equity-indexed annuity, your returns are tied to a financial index that is associated with the stock market. If the market performs well overall, your annuity will also perform well.
  
  

Guarantee

• Both of these types of investments also carry with them a certain amount of guarantee. With the pension, the benefits are guaranteed by the company if the investments do not work out. Even if the company goes out of business, the pension is guaranteed by insurance. With an equity-indexed annuity, you have a minimum amount of return that you can earn even if the financial index performs poorly. If the insurance company fails, you may be repaid through state insurance guaranty funds.