Welcome to 2020’s final edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic.
Here are the top stories from this week:
After years of protests, KY legislators prepare for another run at teacher pensions by John Cheves. In this article for the Lexington Herald-Leader, Cheves writes about how a bill has been pre-filed for the state’s upcoming legislative session that would harm educators’ retirement security. The bill would move all newly hired educators after January 1, 2022 in the Kentucky Teachers’ Retirement System from a defined-benefit pension into a “hybrid” plan combining elements of a defined-contribution plan and a defined-benefit plan. As Cheves notes, “pensions are all that sustains [educators] in retirement” as “they do not collect Social Security benefits.” We will continue to fight in Kentucky for educators’ hard-earned pension benefits to be protected in the next legislative session.
Workers Tap Retirement Savings as a Last Resort by Tara Siegel Bernard. Benard writes for the New York Times how a growing number of American workers are withdrawing savings from their retirement accounts due to the coronavirus-induced economic downturn. According to the five largest 401(k) administrators, more than 2 million Americans have withdrawn money from their retirement plans since March, which is “higher than in a more typical year.” The amounts these workers have been withdrawing are also higher than before the pandemic. According to Fidelity, “the average total withdrawal this year was about $20,000,” which is “more than three times as much as the typical hardship withdrawal — less than $6,000 in a 12-month period — for the last several years.” These withdrawals can negatively impact one’s ability to save for retirement, as workers (assuming they are employed) will have to increase their savings rates in the future to make up for this year’s difference.
How The Gender Income Gap Impacts Women’s Retirement by E. Napoletano and Benjamin Curry. In this article for Forbes, Napoletano and Curry cover a report from the National Institute on Retirement Security (NIRS) which shows how the gender income gap affects women in retirement. Since women earn about $0.80 for every dollar a man earns, their lowered lifetime earnings mean they have less money to save for retirement. Women are also at a disadvantage compared with men because they are more likely to leave the workforce for a time due to caregiving responsibilities, which also can lower their lifetime income and savings. Finally, NIRS also highlighted that women 80 years and older also experience unique challenges, as they are more likely to be widowed and experience higher healthcare costs in retirement. These factors are all critical reasons to protect pensions because they provide a stable and dignified retirement for workers regardless of gender.
As COVID-19 Cases Surge Across the U.S., State and Local Employee Negative Job Sentiment is on the Rise by the Center for State & Local Government Excellence (SLGE). On Monday, SLGE published a new poll of state and local government employees which discovered that many have concerns about their ability to prepare for retirement. The poll found that 74% of state and local employees surveyed indicated that they were “concerned that the pandemic and the related economic crisis will impact their ability to save enough to be financially secure throughout retirement.” It also found that 26% of respondents “have reduced their retirement savings since the start of the pandemic.” Considering public employees put their lives at risk by serving their communities, the last thing they should have to worry about is their ability to retire. That’s why defined-benefit pensions are so crucial for them to retire with the security and dignity they deserve after a lifetime of serving the public.
(P.S. We will publish the next edition of This Week in Pensions on Friday, January 8, due to the holidays, so be sure to check back in the new year for the latest news in the fight for a secure retirement)!