Historically, pensions, savings, and Social Security have been the three pillars of American retirement security. But with the disappearance of private sector pensions, Wall Street’s wild swings threatening 401Ks, and misinformation about Social Security fueling a push for unnecessary cuts, the retirement security of Americans is at risk.
But retirement security isn’t just a problem for seniors and their families. Diane Oakley, executive director of the National Institute on Retirement Security (NIRS), explains why financial insecurity in retirement can be costly for our entire economy:
We’re now staring at a future with older Americans – many of them middle class – who may be unable to pay their basic bills and at risk of falling into poverty. There is a steep price to pay when older Americans can no longer be self-sufficient in retirement – either as increased public assistance costs to taxpayers or backsliding to a time with elder Americans living in poverty.
Social Security is still the only guarantee in retirement – providing more than half of all income for more than 3 out of 4 American seniors – but it was never intended to be a sole source of income. At a time when 56% of workers report having less than $25,000 in savings, defined benefit pensions are proving an important supplement to Social Security, and a safeguard against elder poverty.
According to a new report released by NIRS, each year, defined benefit pensions keep 4.7 million people out of poverty and saves $7.9 billion in public assistance funding. “The bottom line is that households with a pension fare better than those without – even after controlling for socio-demographic factors such as education, race, gender, and work history,” says Dr. Frank Porell, co-author of the study.
In addition to other findings, the report finds receiving a defined benefit pension is associated with:
- 460,000 fewer households that experienced a food insecurity hardship,
- 500,000 fewer households that experienced a shelter hardship,
- 510,000 fewer households that experienced a health care hardship,
- 1.22 million fewer households receiving means-tested public assistance.
Read the full report and learn more about the advantages of defined benefit pensions here.
By EOI Intern Ashwin Warrior