I am talking about the traditional pension, the kind of pension that allows you to retire with dignity. The kind of pension that pays a retirement income based on your salary and the number of years you’ve worked for the employer. This is known as a “defined benefit pension.” I am not talking about dodgy, relatively new-fangled retirement schemes such as 401(k)s, which are hardly more than savings accounts.
On the one hand, a traditional pension is financially the most secure type of retirement. On the other hand, it is on its way to becoming the dodo bird of retirement plans. But that is not what the American people want.
In the early 1980s about 60% of the workers in the private sector had a traditional defined benefit pension plan, but that has fallen to a minuscule 4% in recent years. In the public sector, however, traditional pensions are still offered by about 84% of state and local governments, primarily due to the greater rate of unionization in the public sector. Unions in the private sector have been under attack for decades, and the destruction of traditional pensions has followed the destruction or weakening of labor unions in the private sector and increasingly in the public sector.
The overall demise of adequate pensions in recent decades is only part of this disturbing story. Another recent study conducted by the nonprofit research and education organization National Institute on Retirement Security (NIRS), found that economic inequality has continued to grow, with the result that Blacks and Hispanics own only a sliver of financial assets.
“Even though the Gen X and Millennial generations are more diverse, whites continue to dominate when it comes to accumulating financial assets,” notes the NIRS report. “This economic inequality ultimately translates into financial insecurity in retirement, which is exacerbated by the shift from pensions to individual 401(k) savings accounts.”
The report’s key findings include:
Inequality in the ownership of financial assets both persists and deepens over time. The top five percent of Baby Boomers by net worth owned a greater percentage of that generation’s financial assets in 2019 (58 percent) than in 2004 (52 percent).
Financial asset ownership is highly concentrated among white households. In 2019, white households in all three generations owned three-quarters or more of their generation’s financial assets. Ownership is especially concentrated among white households in the top 25 percent of net worth.
However, these serious problems can be fixed. The researchers offer a range of potential solutions to address this stark inequality, including strengthening and expanding Social Security, protecting pensions, increasing access to savings-based plans for low-income workers, and reforming retirement tax incentives.
Another recent study by NIRS explored the gender gap in retirement. This study found that the median household income for women age 65 and older in 2016 was $47,244, or 83 percent of median household income for men, which was at $57,144. The research also finds that caregiving, especially spousal caregiving, has a more detrimental economic impact on women, while divorce makes retirement more difficult for women.
But again, the researchers also recommended a number of practical fixes.
“Changes to Social Security would make a significant difference in retirement outcomes for women – expanding benefits, adjusting spousal benefits and providing caregiving credits. Another solution would be for states to adopt stronger family leave policies to make it less punitive for women to take time out of the labor force to provide caregiving. Also, creating a universal savings vehicle for all workers would give more women a vehicle to save for their retirement, even if their employer does not offer a plan.”
The trends are clear, but do not be sad. All the news about pensions and a retirement with dignity is not depressing. American people of all stripes and persuasions understand the value of a financially secure retirement. All that’s lacking is the political will. Another new national survey recently reported by NIRS found that over two-thirds of all respondents believed that “the U.S. faces a retirement crisis.” In addition, the survey revealed that 77 percent of Americans agree that all workers, not just those working for state and local government, should have a pension. And even though the nation is deeply divided on many other issues, support for pensions is consistent across party lines. Eighty percent of Democrats, 75 percent of Republicans and 78 percent of Independents agree that all workers should have access to a pension.
There is plenty of hope for a better retirement future in these statistics.
Lawrence D. Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.
