Did you know that benefits paid by pension plans such as LAGERS contribute significantly to supporting the state economy? That’s because the benefits received by retirees from defined benefit plans are largely spent in the communities in which they were earned. Each year, approximately 92% of the income paid to LAGERS benefit recipients remains in the local Missouri economy.
When a LAGERS retiree spends their guaranteed benefit, it is generally within the community they have spent their career in public service. This spending flows through the local community, as the retiree’s benefit changes hands and becomes another person’s income and profit. This ultimately creates a multiplier effect, or chain reaction, where the total economic output from the retiree’s benefit ends up being more than the initial benefit due to circulating impact of each subsequent purchase the benefit produces.
- The initial spending: The retiree’s benefit payment is a fresh infusion of money into the local economy. This initial spending might be on groceries, home repairs, dining at local restaurants, or other community-based services.
- Re-spending by local businesses and workers: The businesses that receive the retiree’s spending now have higher revenues. They, in turn, can purchase more supplies from local vendors, pay wages to employees, or invest in expanding their business offerings. The employees who earn income in these businesses then use their wages to make purchases of their own, often within the same community.
- Multiple rounds of spending: The money doesn’t stop at the first round of transactions. It circulates within the local economy multiple times.
Each successive round of spending expands the total economic activity, making the overall impact larger than the initial benefit payment alone.
According to 2023 research by the National Institute on Retirement Security (NIRS), for every $1 paid in pension benefits to retirees in Missouri, $1.31 dollars in total economic output are returned to the state. In fiscal year 2024, LAGERS paid out $492 million to 30,687 benefit recipients, which means that LAGERS retirees produced $596 million in economic impact to Missouri.
$455 million of that stayed within the state.
“We’re honored to help support the secure retirement of the public servants who have dedicated their lives to making Missouri a great place to live and work,” Executive Director Bill Betts said. “And because LAGERS benefits are prefunded and remain unaffected by market fluctuations, our retirees’ economic impact can be felt even during times of economic downturn.”
At LAGERS, each participating employer has the flexibility to choose its own benefit provisions. Pension benefits are funded through a combination of member and employer contributions and investment income.
Over the past five years, 68 cents of every dollar paid in LAGERS retirement benefits has been funded through investment earnings.
For more information, the full introductory section of the 2024 Annual Comprehensive Financial Report is available online.
