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:
Some Louisiana state retirees to get cost-of-living increase by the Associated Press. Louisiana Governor John Bel Edwards recently signed Senate Bill (SB) 24 into law, which will give certain retired public employees or beneficiaries a cost-of-living adjustment (COLA) to their pension benefits. According to the Associated Press, state lawmakers designed the bill to boost benefits for those whose earnings are below the poverty line, meaning that “people who receive less than $1,450 in pension payments will get an increase equal to $300 or the amount needed to get them to $1,450, whichever is less.” The increase will affect roughly 1,200 retired state employees, teachers, school employees, or beneficiaries.
U.S. public sector pension funding improved during the pandemic year by Andrea Riquier. At the beginning of the coronavirus pandemic and its ensuing economic crisis, some claimed that the downturn would negatively impact public pensions. More data, however, shows this not to be the case as the country bounces back economically from the pandemic. Riquier cites a 2021 update from the Center for Retirement Research at Boston College, estimating that the aggregate funding level of public-sector pensions was 74.7%, increasing from 72.8% last year. While the economy continues to recover, state lawmakers need to practice fiscal discipline and continue making their required contributions to public pensions for the plans to earn optimal investment returns over time.
Will millennials have enough money to retire? By Alicia H. Munnell. Munnell shares information from the Federal Reserve’s 2019 Survey of Consumer Finances, which shows that the retirement outlook for millennials is worse than it is for earlier generations, such as Generation X or the baby boomers. While the labor force participation rate for millennials has eventually risen to similar levels as the Generation X and baby boomer generations experienced at this point in their careers, the median net wealth to income ratio for millennials is still significantly lower than it was for the preceding generations. A major cause of this, Munnell notes, is higher levels of student loan debt for the millennial generation. 40% of millennial households are burdened with student loan debt, and for these households, their loan balances amount to more than 40% of their income. One bright spot that does exist, however, is that millennial public employees love their pensions. According to the National Institute on Retirement Security (NIRS), 84% of millennial state and local public employees say their pension is a reason they stay in their job, and 71% of them say they would be more inclined to leave their job if their pension benefit was cut.
Be sure to check back next week for the latest news in the fight for a secure retirement!