Pensions are the Real Deal
July 2010
The Journal of Pensions Benefit has published a NIRS analysis of why defined benefit pensions have proven to be a durable feature of compensation for state and local governments.
As we look across the nation, we see governments making a number of changes to their retirement plans—increasing contributions, adjusting retirement ages, and modifying benefit design. However, governments’ commitment to defined benefit pensions has generally not wavered. That has been a surprise to some who have called for the public sector to follow the path of the private sector, away from DB pensions and toward greater reliance on defined contribution plans.
But the resilience of DB pensions in the public sector is less surprising to those who understand that these plans are ideally suited to serve the interests of all of the key stakeholders involved—taxpayers, employees, and public employers. Here are three reasons why DBs have proven to be such a durable feature of the compensation landscape in state and local government.
Read the entire article here
43% of Americans Have less than $10,000 Saved for Retirement
March 2010
A recent study from the Employee Benefit Research Institute found that the percentage of Americans with virtually no retirement savings grew for the third straight year.
According to the study, 43% of American workers have less than $10,000 saved for retirement, up from 39% in 2009. An even more sobering figure from the report is that 27% of workers have set aside less than $1,000 for life after work.
Most financial planners agree that people should generally strive to replace around 80% of their pre-retirement income with their pension, Social Security, and personal savings.
Read the entire CNNMoney article here . . .
Poverty Risk Six Times Greater for Older Americans Lacking Pensions
July 30, 2009
Defined benefit pension income plays a critical role in reducing the risk of poverty and hardship among older Americans. According to a study released today, rates of poverty among older households lacking pension income were about six times greater than those with such income. The analysis also finds that pensions reduce – and in some cases eliminate – the greater risk of poverty and public assistance dependence that women and minority populations otherwise would face.
The findings are contained in a new report, “The Pension Factor: Assessing the Role of Defined Benefit Plans in Reducing Elder Hardships.” The report was authored by Dr. Frank Porell, Professor of Gerontology at the McCormack Graduate School of Policy Studies at the University of Massachusetts-Boston, and Beth Almeida, Executive Director at the National Institute on Retirement Security.
“This analysis reveals that pensions have a unique, independent, and positive impact on older Americans economic well-being. This ‘pension factor’ is particularly powerful for improving the economic security of vulnerable older households - women and members of racial/ethic minority groups, ” said Beth Almeida, executive director of the National Institute on Retirement Security.”
“Ensuring older Americans have access to pensions in retirement,” she continued, “can help relieve some of the enormous pressures on Federal, state and local budgets. We calculated a savings of some $7.3 billion in public assistance expenditures in 2006, attributable to pensions. That’s about 8.5 percent of aggregate public assistance dollars received by all American households in 2006 for the same benefit programs. These are sizable dollars.”
The Pension Factor finds that pensions have helped substantial numbers of older Americans avoid material hardships associated with inadequate food, shelter, and health care, and also avoid reliance on public assistance. More specifically, key findings indicate that pension receipt among older American households in 2006 was associated with:
- 1.72 million fewer poor households and 2.97 million fewer near-poor households
- 560,000 fewer households experiencing a food hardship
- 380,000 fewer households experiencing a shelter hardship
- 320,000 fewer households experiencing a health care hardship
- 1.35 million fewer households receiving means-tested public assistance
- $7.3 billion in public assistance expenditures savings, representing about 8.5 percent of aggregate public assistance dollars received by all American households for the same benefit programs
“Evidence that pensions contribute to the retirement readiness of older American households has long been noted by experts and academics,” said report lead author Dr. Frank Porell. “With our analysis, we now have hard numbers on the people and budget impacts of pensions. The bottom line: pensions help older Americans escape poverty – especially women and minorities who we know are most vulnerable,” he said.
Additional data and analysis is available in the full research brief available at www.nirsonline.org.