Jeff Kempker, CEBS, CRC
Photo by Fabian Blank on Unsplash
- About half of Americans age 55 and older have nothing saved for retirement. However, 20% of these do have access to a defined benefit pension plan.
- Defined benefit pensions are the preferred retirement plan for state and local government employers.
- 39 employers have chosen LAGERS defined benefit plan for their employees within the last year. Almost all switched from a 401(k)-type plan.
- Defined benefit plans, like LAGERS, help government employers attract and retain good workers to serve the community.
The U.S. Government Accountability Office recently reported that about half of Americans age 55 and older have nothing saved for retirement. This is a dim statistic. However, the numbers get slightly better when you factor in defined benefit pension plans. Of the 48% of Americans age 55 and older with no retirement savings, 20% of the people in this group have access to a defined benefit pension plan. The good news here is that this group will at least have two of the three legs on the three-legged stool for a secure retirement. The two legs being a defined benefit pension and social security. The missing leg being personal savings.
The report doesn’t specify, but it is a safe assumption that the majority of those reported as having a defined benefit pension plan are state and local government workers. While defined benefit pension plans are continuing to be phased out in the private sector, around 90% of state and local government workers in the U.S. still have access to these plans.
In Missouri, LAGERS is proof that pension plans for public workers are sustainable. LAGERS is not just surviving. LAGERS is thriving. In the private sector, pension plans continue to be closed in favor of 401(k)-type plans. Contrast that to what’s going on in Missouri, where in the last year, 39 local government employers have chosen LAGERS defined benefit plan for their workers. All but two of these employers had a 401(k)-type plan in place before choosing to switch to LAGERS defined benefit pension.
Local governments choose LAGERS over other types of retirement plans to attract and retain good workers to serve the taxpayers. They choose LAGERS so that employees can leave the workforce with dignity and security when they’re ready to retire. They choose LAGERS because they know the benefits will be there if one of their workers becomes disabled or dies before reaching retirement. They understand the importance of continuity of public services and how detrimental high turnover and low moral can be to communities. They choose LAGERS to reduce uncertainty and promote stability.
Defined benefit pension plans are not a dying breed. In Missouri, these plans are alive and well in the public sector and continue to be a good investment for Missouri.
