Welcome to this week’s 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:
Women’s Wage Gap Linked to Retirement Insecurity by Eric Galatas. Galatas wrote for the Public News Service in Colorado about how the wage gap leads to higher financial insecurity for women in retirement. For example, women in Colorado make 80 cents for every dollar a man earns, giving them fewer earnings they can put into retirement savings. According to Jennifer Norr, president of the Women in Pensions Network, another factor is that female workers are likelier than their male counterparts to work part-time in jobs that don’t offer a retirement plan. Finally, they are also more likely to leave the workforce to provide caregiving for loved ones, making it more challenging for them to save for retirement. Norr said that, because of these causes, “it’s all the more reason why women need resources like pensions so that they can retire with dignity.”
Senate Bill 84 is fearmongering by Kimberlie Prior. Adrian Moore, the vice president of the anti-pension Reason Foundation, wrote an op-ed on Wednesday urging the Florida legislature to pass Senate Bill 84. This legislation would close the Florida Retirement System (FRS) to all newly hired public employees. In a rebuttal to Moore’s article, Prior argues Moore misunderstands what an unfunded liability is to push for closing FRS. “An unfunded liability is not the same as an underfunded plan,” Prior writes. She goes on to note that “unless every worker in Florida retires at the same time — tomorrow — the unfunded liability represents only the money that will need to be earned or collected by the time they do,” while “an underfunded plan, on the other hand, is one that has not met or made its annual required contribution (ARC).” FRS currently has a funded status of 82%, indicating that it is not underfunded. Finally, Prior accurately states that taxpayers are not on the hook for funding TRS, as “just 3-5% of the total budget is used for the pension fund” and “about 60% of revenue for public pensions come from earnings on the fund, not taxpayer dollars.” We’re not shocked that the Reason Foundation continues to circulate anti-pension misinformation, but Prior’s op-ed accurately corrects the record.
77 Percent of Americans Support Pensions for All Workers, According to New Research from the National Institute on Retirement Security by the National Institute on Retirement Security (NIRS). Yesterday, NIRS released its results from a new survey which shows an overwhelming majority of Americans across party lines support pensions. In addition to 77% of Americans supporting pensions for all workers, not just public employees, 80% of Democrats, 78% of Independents, and 75% of Republicans support expanding pension access to all. The survey also showed most Americans believe pensions are a valuable tool for governments, as 76% of respondents agreed that pensions are a good way to recruit and retain public safety employees. Three-fourths of respondents also said that pensions are a good way to recruit and retain public educators. NIRS’ data reveal that protecting pensions isn’t just the morally right thing to do for our nation’s public employees; it’s also extraordinarily popular with the American people.
Why Millennials are Scared of Retirement by John Rampton. In a piece for Medium, Rampton outlined several reasons why Millennials face difficulties in preparing for retirement. Rampton notes that a high unemployment rate for Millennial workers, stagnant wages, and student loan debt of roughly $33,000 per borrower have contributed to retirement insecurity among the Millennial generation. Thankfully, most Millennials who serve as public employees will have access to a defined-benefit pension. Research from NIRS shows Millennial public employees value pensions’ ability to provide economic stability in retirement, as 84% of them have said their pension benefit is why they continue to stay in a state and local government job.
Just 26% of Americans Near or at Retirement Age Have Enough Saved for Retirement by Schroders. Investment manager Schroders shared findings from its U.S. Retirement Survey yesterday, and the results are not promising for most workers’ retirement outlook. 60% of non-retired workers between the ages of 60 and 67 in the survey reported that they did not have enough money saved for retirement, and just 26% said they had enough money to retire. The pandemic-induced downturn has also made it more difficult for workers to save for retirement, with 38% of respondents saying they had saved less money due to the ongoing economic crisis. The rise of defined-contribution accounts, like the 401(k), is one answer for why so many workers face a retirement security crisis. 401(k) use (which were never intended to be the primary retirement savings vehicle for most Americans) skyrocketed in the private-sector after they were introduced in 1978, with many corporations utilizing them to not offer their workers a defined-benefit pension. Since then, the results have been disastrous. Fidelity Investments, for example, claims that the median amount in its 401(k) accounts is just $24,500, which is not nearly enough to retire. Defined-benefit pensions, however, have been proven to help public employees retire with the security and dignity they deserve after a lifetime of public service.
Be sure to check back next week for the latest news in the fight for a secure retirement!