Last week, the National Institute on Retirement Security (NIRS) released an updated report showing how spending from defined-benefit pensions boosts economies in communities across the country.
The report is divided into three sections that measure pensions’ economic impact: the total amount of pension benefits paid out to participating workers, expenditures from these benefits, and the economic output they supported (jobs, tax revenue, etc.).
In 2018, NIRS found that $578.7 billion in pension benefits were distributed to nearly 24 million retirees of both the private and public sector. Of that $579.7 billion, $308.7 billion was paid out to 11 million retired state and local public employees and beneficiaries.
In the hands of recipients, these dollars stimulated the economy. The report calculated that pension spending supported nearly 7 million American jobs. Pension spending supported jobs in most sectors of the economy, from more than 840,000 jobs in retail stores and restaurants to almost half a million jobs in hospitals and nursing and community care facilities. It also generated $1.3 trillion in total economic output nationwide. Another way to look at it is that each dollar paid out in benefits supported $2.19 in total economic output.
This spending also provides valuable tax revenue, supporting $191.9 billion in federal, state, and local tax revenue, showing that pensions can be a great source of tax revenue at all levels of government.
Tax revenue also wasn’t the only benefit taxpayers saw from pension spending. Because pension plans are pre-funded, only a small portion of pension funding comes directly from taxpayers. According to NIRS, investment earnings made up 64.07% of state and local pension contributions between 1993 and 2018. NIRS found that, for each taxpayer dollar that was contributed to public pensions, it supported $8.80 in total economic output. Since investment earnings make up the bulk of a plan’s funding, each taxpayer dollar invested into public pensions will have a greater multiplier effect because “only 24.86 cents of every dollar paid out in pension benefits in 2018 was generated through taxpayer contributions,” according to NIRS.
This new report from NIRS proves that public pensions provide an excellent return on investment for communities throughout the nation, and you can find state-specific information on how pensions have benefited your state here. They must be protected so all public employees can retire with dignity.