This week is National Save for Retirement Week. Established by an act of Congress in 2006, this week is intended to raise awareness and promote participation in employer-sponsored retirement savings plans. We at the National Public Pension Coalition believe every American deserves to retire with dignity. However, National Save for Retirement Week is often used as a means to promote defined contribution, 401(k)-style retirement plans- plans which have contributed to the looming retirement crisis.
It’s clear that everyday Americans are worried about their retirement. Poll after poll indicates that Americans of all stripes share this concern and the evidence backs them up. Retirement experts warn that millions of working Americans have no retirement savings at all and those who do typically don’t have enough. The shift from defined benefit pensions to defined contribution, 401(k) plans in the private sector has contributed to this lack of savings. Now, some politicians and Wall Street interests want to do the same thing in the public sector.
Unlike defined contribution plans, defined benefit pensions offer a safe, secure, and reliable source of retirement savings. Pension plans enroll employees automatically and employee contributions are deducted from every paycheck, meaning employees never miss out on saving for their retirement. Pensions also pool assets and share risks collectively, meaning an individual worker doesn’t bear all the risk of a market downturn, like the Great Recession.
The spirit behind National Save for Retirement Week is admirable. However, it’s important that we look at which type of retirement savings plan is actually going to provide the dignified retirement that hardworking Americans deserve. It’s clear from the evidence that defined benefit pensions are the best plan for providing a secure retirement.
If you want to learn more about defined benefit pensions, then check out this video we created: Pensions in 60 Seconds.