The US government has a compulsory social security plan, which covers more than 96% of the employed population in the country and provides basic retirement security.

This social security plan adopts the "pay-as-you-go" payment method, that is, employees and employers each pay 6.2% of the "payroll tax" to pay old-age insurance for retired employees. All the extra money is invested in federal government bonds.

This extremely conservative investment method makes these pensions very safe. For example, during the economic crisis in 2008, American social pension funds still achieved an annual rate of return of 5. 1%.

However, the pension provided by the social security plan can only make ends meet. The main pension for Americans still comes from the public pension plan funded by the government and the employer pension plan funded by corporate employers.

Most government departments will provide old-age security for their employees in this way: the employer will pay the pension to the employees according to the indicators such as the working years of the employees in this institution and according to a certain calculation formula.

According to this plan called DB form, the monthly fees paid by the government or enterprises will be deposited into a pension trust fund or group annuity insurance will be purchased from life insurance companies. If the pension trust fund or life insurance cannot be paid in full, the employer needs to make up the difference.

Employers in enterprises often choose another pension plan called DC: both employers and employees deposit a certain percentage of their personal wages into employees' personal accounts during their employment.

This account can be taken away after employees change jobs, which is similar to the "five insurances and one gold" pension in China, but the biggest difference is that employees need to decide how to invest the money in their personal accounts. After retirement, the principal and investment income in the account are employees' pension funds.

Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.