NIRS Study Finds Americans Support Pensions to Address Retirement Crisis

NIRS Study Finds Americans Support Pensions to Address Retirement Crisis

A whopping 83% of working age Americans surveyed agree that having a pension makes it more likely to have a secure retirement, the National Institute on Retirement Security found in a recent study.

Without a pension, most middle-class Americans won’t accumulate enough savings to be self-sufficient in retirement, NIRS said. The survey found that 77% of Americans believe that the shift to defined contribution plans has made it harder to achieve the so-called “American Dream.”

NIRS laid out in stark terms that there’s a very real retirement crisis in America that must be addressed:

● Most Americans aren’t on track for a secure retirement.

● About 50% of American households are at risk of failing to maintain their standard of living in retirement.

● Americans understand the depth of the crisis and increasingly view retirement as being “out of reach.”

Pensions were originally designed as an important part of the three-legged stool supporting retirement income—Social Security, personal savings, and pensions. However, over the past four decades, employers have largely replaced private sector pensions with defined contribution plans, such as 401(k)s, in a bid to shift retirement investment risk from employers to employees.

According to the Congressional Research Service, the number of active participants in private sector defined benefit plans decreased by 53.7% between 1975 and 2019. Furthermore, the Federal Reserve Boards’ 2022 Survey of Consumer Finances found that 46% of American households had no retirement account savings.

So, where do we go from here? The Pension Rights center offered some possible solutions in a recent statement to the Health Education Labor and Pensions Committee.

For starters, PRC suggested, Congress could redirect some of the billions of dollars in tax subsidies that it gives to retirement plans from high-income taxpayers to low- and middle-income retirement savers.

We also suggested that part of the solution could come from the development and promotion of innovative hybrid-type plans that would better balance the financial risk for employees and employer plan sponsors. Such plans would retain key features of defined benefit plans, such as guaranteed lifetime income in retirement and professional investment management.

Finally, it’s essential that we enhance consumer protections for members of both defined benefit and defined contribution plans. Examples include adding safeguards when a plan sponsor transfers pension liabilities to an insurance company and imposing strict rules to ensure that any investment advice given to 401(k) participants is sound and without any conflict of interest.